UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. )

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PHOTONIC PRODUCTS GROUP, INC.
(Name of Registrant as Specified In Its Charter)


(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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PHOTONIC PRODUCTS GROUP, INC. - -------------------------------------------------------------------------------- (Name of Registrant as Specified in Its Charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): |X| No fee required. |_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. (1) Title of each class of securities to which transaction applies: (2) Aggregate number of securities to which transaction applies: (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): (4) Proposed maximum aggregate value of transaction: (5) Total fee paid: |_| Fee paid previously with preliminary materials. |_| Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11 (a) (2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: ~~INRAD, INC.~~

181 Legrand Avenue

Northvale, New Jersey 07647 ~~NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD AUGUST 14, 2000~~

Notice of Annual Meeting of Shareholders

to be Held August 25, 2004

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of ~~INRAD, Inc.~~PHOTONIC PRODUCTS GROUP, INC. (the ~~"Company"~~“Company”) will be held at the offices of Lowenstein, Sandler ~~P. C.,~~PC 65 Livingston Avenue, Roseland, New Jersey on ~~Monday,~~Wednesday, August ~~14, 2000~~25, 2004 at 2:10:00 ~~p.m.~~a.m. for the following purposes:

1. ~~To elect five directors~~ Consideration of and vote to ~~serve until~~approve the ~~next Annual Meeting~~proposed change of ~~Shareholders. 2. To amend~~ the Corporation’s Certificate of Incorporation ~~of the Company~~ to increase the total number of Common Shares authorized. ~~3. To~~

2. Consideration of and vote to approve the ~~INRAD, Inc.~~proposed change to increase the total number of Common shares authorized for issuance under the 2000 Equity Compensation Program. 4.

3. To ~~amend the INRAD, Inc. Key Employee Compensation Program 5.~~elect two Class I Directors, two Class II Directors, and one Class III Director to hold office for 1, 3, and 2 years respectively.

4. To ~~consider and act upon~~transact such other ~~matters, which~~business as may properly come before the meeting or any adjournment thereof.

The Board of Directors has fixed the close of business on June 30, ~~2000,~~2004, as the date for determining the shareholders of record entitled to receive notice of, and to vote at, the Annual Meeting. Whether or not you expect to be present at the Annual Meeting, you are requested to complete and sign the enclosed proxy and return it in the enclosed envelope as promptly as possible. Shareholders who are present at the meeting may revoke their proxies and vote in person. We hope you will attend. ~~By Order of the Board of Directors William S. Miraglia, Secretary Northvale, New Jersey July 24, 2000~~ ~~INRAD,~~

	By Order of the Board of Directors


	William S. Miraglia, Secretary


Northvale, New Jersey
July 19, 2004

PHOTONIC PRODUCTS GROUP, INC.

PROXY STATEMENT

The following statement is furnished in connection with the solicitation of proxies by the Board of Directors of ~~INRAD, Inc.~~PHOTONIC PRODUCTS GROUP, INC., a New Jersey corporation with its principal offices at 181 Legrand Avenue, Northvale, New Jersey 07647 (the ~~"Company"~~“Company”), ~~of proxies~~ to be used at the Annual Meeting of Shareholders of the Company to be held at the offices of Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New Jersey on ~~Monday,~~Wednesday, August ~~14, 2000~~25, 2004 at 2:10:00 ~~p.m.~~a.m. This Proxy Statement and the enclosed form of proxy are first being sent to shareholders on or about July ~~15, 2000 SHAREHOLDERS ENTITLED TO VOTE~~ 19, 2004.

Shareholders Entitled to Vote

Only shareholders of record at the close of business on June 30, ~~2000,~~2004, the record date fixed by the Board of Directors, will be entitled to notice of, and to vote at, the Annual Meeting. At the close of business on the record date, there were ~~4,776,578~~5,441,353 shares of the ~~Company's~~Company’s Common Stock, par value $.01 per share (the ~~"Common Stock"~~“Common Stock”), outstanding and entitled to vote at the meeting. Each share is entitled to one vote.

The presence in person or by proxy of owners of a majority of the outstanding shares of the ~~Company's~~Company’s Common Stock will constitute a quorum for the transaction of business at the ~~Company's~~Company’s Annual Meeting. Assuming that a quorum is present, the election of ~~directors~~two Class I Directors, two Class II Directors, and one Class III Director to hold office for 1, 3, and 2 years respectively will require the ~~affirmative~~ vote of a plurality of the shares of Common stock represented and entitled to vote at the Annual Meeting. Also, assuming that a quorum is present, the proposed change of the Company’s Certificate of Incorporation to increase the total number of Common Shares authorized and the proposed change to increase the total number of Common Shares authorized for issuance under the 2000 Equity Compensation Program, will require the vote of a majority of the shares of Common Stock represented and entitled to vote at the Annual Meeting. The approval of the amendment of the Certificate of Incorporation, the 2000 Equity Compensation Program and the amendment of the INRAD, Inc. Key employee compensation Program will require approval of a majority of votes cast.

For purposes of determining the votes cast with respect to any matter presented for consideration at the Annual Meeting, only those cast ~~"for"~~“for” are included. Abstentions and broker non-votes are counted only for the purpose of determining whether a quorum is present at the Annual Meeting. Owners of Common Stock are not entitled to cumulative voting in the election of directors. ~~VOTING: REVOCATION OF PROXIES~~

Voting: Revocation of Proxies

A form of proxy is enclosed for use at the Annual Meeting if a ~~shareowner~~shareholder is unable to attend in person. Each proxy may be revoked at any time before it is exercised by giving written notice to the secretary of the Meeting. All shares represented by valid proxies pursuant to this solicitation (and not revoked before they are exercised) will be voted as specified in the form of proxy. If no specification is given, the shares will be voted in favor of the ~~Board's nominees~~Board’s nominee for directors, and in favor of the amendment of the Certificate of Incorporation and the approval of the 2000 Equity Compensation Program and the amendment of the INARD, Inc. Key Employee Compensation Program asdirector described in this Proxy Statement. ~~COSTS OF SOLICITATION~~

Costs of Solicitation

The entire cost of soliciting these proxies will be borne by the Company. In following up the original solicitation of ~~the~~ proxies by mail, the Company may make arrangements with brokerage houses and other custodians, nominees and fiduciaries to send proxies and proxy materials to the beneficial owners of the stock and may reimburse them for their expenses in so doing. If necessary, the Company may also use its officers and their assistants to solicit proxies from the shareholders, either personally or by telephone or special letter. ~~PRINCIPAL SHAREHOLDERS~~

Principal Shareholders

The following table presents certain information with respect to the security ownership of the ~~Directors~~directors and named executive officers of the Company and the security ownership of ~~the only individuals~~each individual or ~~entities~~entity known by the Company to be the beneficial owner of more than 5% of the ~~Company's~~Company’s Common

Stock outstanding (5,441,353 shares) as of June 30, ~~2000.~~2004. Percentages that include ownership of options or convertible securities are calculated assuming exercise or conversion by each individual or entity of the options, (including “out-of-the-money options”), or convertible securities owned by each individual or entity separately without considering the dilutive effect of option exercises and security conversions by any other individual or entity. The Company has been advised that all individuals, or entities, listed have the sole power to vote and dispose of the number of shares set opposite their names in the table. 2
~~Percent of Name and Address Number of shares Common Stock - --------------------------------------------------------------------------------~~ Warren Ruderman 1,728,721 36.2 C/o INRAD, Inc. 181 Legrand Avenue Northvale, NJ 07647 Clarex, Ltd. 2,582,214 (1) 48.9 C/o Bank of Nova Scotia Trust Company Bahamas Ltd. P.O. Box N1355 Nassau, Bahamas CNA Holdings, Inc. 300,000 6.3 86 Morris Avenue Summit, NJ 07901 Frank Wiedeman 57,750 (2) 1.2 C/o INRAD, Inc. Thomas Lenagh 31,250 (3) 0.6 C/o INRAD, Inc. Daniel Lehrfeld -0- 0.0 C/o INRAD, Inc. John Rich -0- 0.0 C/o INRAD, Inc. Directors and Executive 1,873,946 (4) 38.1 Officers as a group (9 persons)

Name and Address of Beneficial Owner	Number of shares		Percent of Common Stock
Clarex, Ltd. & Welland Ltd.	9,227,866	(1)	78.7	%
Bay Street and Rawson Square
P.O. Box N 3016
Nassau, Bahamas

Warren Ruderman	1,222,400		22.5	%
45 Duane Lane
Demarest, NJ 07627

Daniel Lehrfeld	561,100	(2)	9.5	%
C/O PPGI
181 Legrand Ave
Northvale, NJ 07647

Hoechst Celanese Corp.	300,000		5.5	%
Routes 202-206 North
Box 2500
Somerville, NJ 08876

Thomas Lenagh	105,000	(3)	1.9	%
C/O PPGI
181 Legrand Ave
Northvale, NJ 07647

Frank Wiedeman	97,000	(4)	1.8	%
C/O PPGI
181 Legrand Ave
Northvale, NJ 07647

John Rich	38,200	(5)	0.7	%
C/O PPGI
181 Legrand Ave
Northvale, NJ 07647

Jan Winston	31,400	(6)	0.6	%
C/O PPGI
181 Legrand Ave
Northvale, NJ 07647

Maria Murray	187,830	(7)	3.3	%
C/O PPGI
181 Legrand Ave
Northvale, NJ 07647

William Miraglia	68,120	(8)	1.2	%
C/O PPGI
181 Legrand Ave
Northvale, NJ 07647

Devaunshi Sampat	111,200	(9)	2.0	%
C/O PPGI
181 Legrand Ave
Northvale, NJ 07647

Directors and Executive Officers as a group (8 persons)	1,200,350	(10)	18.7	%

(1) Including ~~500,000~~900,000 shares ~~issuable upon conversion of 10%~~subject to convertible preferred stock exercisable or convertible within 60 ~~days.~~ days, 2,380,952 shares subject to convertible promissory notes at a stated conversion of $0.42, the market value of the Company’s Common Stock on the date of issuance of the Note, 3,000,000 shares subject to convertible promissory notes at a stated conversion of $0.50, the market value of the Company’s Common Stock on the date of issuance of the Note and 400,000 warrants.

(2) Including ~~57,750~~48,000 shares subject to convertible preferred stock and 396,300 shares subject to options ~~or warrants~~ exercisable within 60 days.

(3) Including ~~31,250~~80,500 shares subject to options ~~or warrants~~ exercisable within 60 days.

(4) Including ~~143,625~~47,000 shares subject to options ~~or warrants~~ exercisable within 60 days. 3

(5) Including 12,000 shares subject to convertible preferred stock and 15,300 shares subject to options exercisable or convertible within 60 days.

(6) Including 4,000 shares subject to convertible preferred stock and 22,000 shares subject to options exercisable or convertible within 60 days.

(7) Including 180,855 shares subject to convertible preferred stock, stock options, and warrants exercisable or convertible within 60 days.

(8) Including 65,600 shares subject to convertible preferred stock, stock options, and warrants exercisable or convertible within 60 days.

(9) Including 108,400 shares subject to convertible preferred stock, stock options, and warrants exercisable or convertible within 60 days.

(10) Including 979,655 shares subject to convertible preferred stock, stock options, and warrants exercisable or convertible within 60 days.

PROPOSAL ONE ELECTION OF DIRECTORS Five directors are to be elected to serve a term of one year and thereafter until their respective successors shall have been elected and shall have qualified. Unless a shareowner checks the box "withhold authority" on his proxy or indicates that his shares should not be voted for certain nominees, it is intended that the persons named in the proxy will vote for the persons listed in the table below to serve as directors. Discretionary authority is solicited to vote for the election of a substitute for any nominee who, for any reason, presently unknown, cannot be a candidate for election. NOMINEES The following table sets forth the names and ages of the nominees for election to the Board of Directors, the principal occupation or employment of each nominee for the past five years, the principal business of the organization in which said occupation is or was carried on, the name of any other public corporation for which they served as Board members, and the period during which each nominee has served as a director of the Company. POSITION WITH COMPANY AND OTHER BUSINESS
NAME AND AGE EXPERIENCE DURING PAST FIVE YEARS DIRECTOR SINCE - --------------------------------------------------------------------------------------------------------------- Thomas Lenagh (74) Chairman of the Board of Directors (1999 - Present) 1998 Management Consultant (1990-Present) Daniel Lehrfeld (56) President and Chief Executive Officer (1999-Present) 1999 Vice President, General Manager Electro-Optics Center A division of Raytheon (formerly GM/Hughes and Magnavox Electronics ( 1990-1999) Warren Ruderman (80) Founder and former Chief Executive Officer (1973-2000) 1973 Frank Wiedeman (84) Executive Director (1980 - Present) 1998 American Capital Management, Inc. John Rich (62) Vice President, C&D Technologies, Inc. (1999-Present) 2000 President, Hughes Danbury Optical Systems (1990-1999)
During 1999, four meetings of the Board of Directors were held. Each non-employee director is paid $500 for each Board Meeting he attends, and $250 for each conference call meeting he participates in. During 1999, each director attended or participated in all the meetings held. The Board has an Audit Committee whose members presently are John Rich, Tom Lenagh and Frank Wiedeman. The Audit Committee reviews the independence, qualifications and activities of the Company's independent accountants. It meets privately with them as well as with management. The Committee recommends to the Board the appointment of the independent accountants. The Board has no separate Nominating Committee. The entire Board selects management nominees for election as directors. While the Board will consider nominees recommended by stockholders, it has not established formal procedures for this purpose. 4 The directors serve one-year terms. Pursuant to agreements between the Company and CNA Holdings, Inc. ("CNA"), CNA may designate a representative for nomination to the Company's Board of Directors; the Company has agreed to use its best efforts to have a designated representative elected to the Board of Directors. At the present time, CNA has not designated a representative to the Board. Pursuant to an agreement between INRAD and Clarex, Ltd. ("Clarex"), the Company has agreed to use its best efforts to have two individuals selected by Clarex elected to the Board of Directors as long as any of the subordinated convertible notes or debentures are outstanding. Clarex has selected Messrs. Wiedeman and Lenagh as representatives. 5 ~~PROPOSAL TWO~~

INCREASE IN AUTHORIZED SHARES

The Board of Directors has recommended that the stockholders approve an amendment to the ~~Company's~~Company’s Certificate of Incorporation, as permitted by the New Jersey Business Corporation Act, to increase the number of authorized shares of Common Stock from ~~6,000,000~~40,000,000 shares to ~~15,000,000~~60,000,000 shares.

The Company is currently authorized by its Articles of Incorporation to issue ~~6,000,000~~40,000,000 shares of Common Stock, par value $0.01 per share. As of June 30, ~~2000, 4,776,578~~2004, 5,441,353 shares of Common Stock were issued and outstanding. In addition, the Company has reserved shares of Common Stock for issuance as follows: 500,000 shares for issuance upon conversion of the ~~Company's~~Company’s Series A 10% Convertible Preferred Stock, ~~[plus~~840,000 shares for issuance upon conversion of the Company’s Series B 10% Convertible Preferred Stock, (plus an indeterminate number of shares for issuance upon conversion of rights to receive unpaid dividends on such ~~shares]~~shares), ~~143,092~~5,400,000 shares for issuance upon ~~exercise~~conversion of ~~stock purchase warrants, and 500,000~~the Company’s Subordinated Convertible Note, 4,000,000 shares, (or if Proposal 2 is passed, 6,000,000 shares) for issuance upon exercise of authorized stock options under the ~~Company's~~Company’s stock option ~~plan.~~plan and 400,000 for warrants issued to Clarex LTD for loan guarantees and extensions. Accordingly, the Company has issued or reserved ~~5,919,670~~16,581,353 shares (i.e., all but 80,300 of its total authorized shares). The Company has no plans, understandings or negotiations underway at this time for the issuance of any material amounts of unissued and unreserved(and will need to reserve 19,581,353 shares ~~except for the 2000 Equity Compensation Program described in proposal three. If proposal two~~if Proposal 2 is ~~not approved by the shareholders the Company will not have sufficient authorized shares put into reserve of 1,500,000 for issuance under the 2000 Equity compensation Program.~~ passed).

The Board of Directors believes that it is desirable to increase the number of shares of Common Stock to ~~15,000,000 both to provide for the 2000 Equity Compensation Program and other requirements.~~60,000,000. The purpose of such increase is to place the Company in a position where it will continue to have a sufficient number of shares of authorized and unissued Common Stock, which can be issued for or in connection with such corporate purposes as, may, from time to time, be considered advisable by the Board of Directors. Having such shares available for issuance in the future will give the Company greater flexibility and will allow such shares to be issued as determined by the Board of Directors of the Company without the expense and delay of a special ~~shareholder's~~shareholder’s meeting to approve such additional authorized capital stock. Such corporate purposes could include, ~~with~~without limitation: (a) issuance in connection with any desirable acquisitions which may be presented to the Company, (b) the payment of stock dividends or issuance pursuant to stock splits, (c) the issuance of Common Stock upon exercise of options granted under the ~~Company's~~Company’s stock options plan or in connection with other employee benefit plans, (d) the issuance of Common Stock upon the conversion of any preferred stock, the exercise of warrants or the conversion of other securities convertible into Common Stock which may be outstanding from time to time, and (e) issuance in connection with an offering to raise capital for the Company.

The additional shares of Common Stock, together with other authorized stock and unissued shares, generally would be available for issuance without any requirement for further stockholder approval, unless stockholder action is required by applicable law, the ~~Company's~~Company’s governing documents, or the rules of any stock exchange on which the ~~Company's~~Company’s securities may then be listed.

Although the Board of Directors will authorize the issuance of additional shares of Common Stock only when it considers doing so to be in the best interests of ~~stockholders,~~the Company, the issuance of additional

shares of Common Stock may, among other things, have a dilutive effect on the earnings and equity per share of Common Stock and on the voting rights 6 of holders of shares of Common Stock. The increase in the authorized number of shares of Common Stock also could be viewed as having anti-takeover effects. While the Board of Directors has no current plans to do so, shares of Common Stock could be issued in various transactions that would make a change in control of the Company more difficult or costly and, therefore, less likely. For example, shares of Common Stock could be privately sold to purchasers favorable to the Board of Directors in opposing a change in control or to dilute the stock ownership of a person seeking to obtain control. The Company is not aware of any effort to accumulate shares of Common Stock or obtain control of the Company by a tender offer, proxy contest, or otherwise, and the Company has no present intention to use the increased shares of authorized Common Stock for anti-takeover purposes.

Holders of Common Stock do not have preemptive rights to subscribe to additional securities that may be issued by the Company, which means that current stockholders do not have a right to purchase any new issue of capital stock of the Company in order to maintain their proportionate ownership interest. However, stockholders wishing to maintain their interests may be able to do so through normal market purchases.

The affirmative vote of a majority of the votes cast by the holders of shares entitled to vote thereon is required to approve the proposed amendment. If the stockholders do not approve the proposed amendment, the number of authorized shares of Common Stock will remain ~~6,000,000 and the company will not issue options under the 2000 Equity Compensation Program, even if approved by the Shareholders.~~40,000,000. Proxies will be voted in accordance with the specifications marked thereon, and, if no specification is made, will be voted ~~"FOR"~~“FOR” the increase in the number of authorized shares of Common Stock.

The Board of Directors recommends that the shareholders vote ~~"FOR"~~“FOR” the proposal to increase the number of authorized shares of Common Stock.

If the proposed amendment is adopted by the stockholders, the Company’s Restated Certificate of Incorporation will be amended, as reflected in Exhibit B, to increase the number of shares authorized as promptly as practicable.

PROPOSAL ~~THREE ADOPTION~~TWO

APPROVAL OF THE INRAD, INC.AMENDMENT TO 2000 EQUITY COMPENSATION PROGRAM The Board of Directors of

At the ~~Company (the "Board") adopted~~Annual Meeting, the ~~INRAD, Inc.~~Shareholders are being asked to approve an amendment to the Company’s 2000 Equity Compensation Program (the ~~"Program"~~“2000 Program”), in order to increase the number of shares reserved for issuance of stock options, stock appreciation rights and performance shares there-under by 2,000,000 shares, from 4,000,000 shares to 6,000,000 shares of Common Stock. The amendment would also increase the maximum number of shares of Common Stock subject to ~~shareholder approval. The Company currently maintains~~options, separately exercisable stock appreciation rights or other awards that any individual could receive in one year from 600,000 to 800,000. No determinations have yet been made as to the ~~1991 Key Employee Compensation Program (the "1991 Program"), and it has reserved 500,000 shares~~recipients of the ~~Company's Common Stock for issuance under the 1991 Program.~~ increased number of option shares.

As of June 30, 2004 approximately 1,847,000 options were outstanding under the 2000 ~~74,500~~Program and 2,153,000 shares remained available for ~~issuance~~awards under the ~~1991~~2000 Program. Approval of the amendment to the 2000 Program is intended to ensure that the Company can continue to provide stock options and other performance incentives at levels determined appropriate by the ~~Board.~~Board of Directors, and to increase flexibility for individual grants. The ~~following is a brief description~~2000 Program was adopted by the Board of Directors in May 2000 and approved by the ~~material features~~Stockholders in August 2000. On May 24, 2004, the Board of ~~the Program. Such description is qualified in its entirety by reference~~Directors adopted this amendment to the ~~Program, a copy of which is set forth as Exhibit A to this Proxy Statement. PURPOSE~~ plan and recommends that the Stockholders approve such amendment.

Purpose

The purpose of the 2000 Program is to help attract and retain superior directors, officers, key employees and consultants of the Company and its subsidiaries and to encourage them to devote their abilities and industry to the success of the Company. ~~SHARES AND INCENTIVES AVAILABLE UNDER THE PROGRAM~~

Shares and Incentives Available Under the Program

The 2000 Program provides for grants of options, stock appreciation rights, and performance shares. AnIf this amendment is approved, an aggregate of ~~1,500,000~~6,000,000 shares of Common Stock ~~are~~will be authorized for issuance under the 2000 Program, which amount will be proportionately adjusted in the event of certain changes in the ~~Company's~~Company’s capitalization, a merger, or a similar transaction. If any of the options (including incentive stock options) or stock appreciation rights granted under the Program expire or terminate for any reason before they have been exercised in full, the unissued shares subject to those expired or terminated options and/or stock appreciation rights shall again be available for purposes of the 2000 Program. Such shares may be authorized and unissued shares or treasury shares. ~~As of July 5, 2000, the closing sale price per share of the Common Stock on the OTC Bulletin Board was $3.50. ELIGIBILITY~~

Eligibility

All directors, officers, employees and consultants of the Company and its subsidiaries are eligible to receive awards under the 2000 Program. The Company estimates that as of June 30, ~~2000,~~2004, there were

approximately 7270 individuals eligible to participate in the 2000 Program. 8 ~~DETERMINATION OF ELIGIBILITY; ADMINISTRATION OF THE PROGRAM~~ On July 1, 2004, the closing price of the Common Stock was $1.45.

Determination of Eligibility; Administration of the Program

The 2000 Program ~~will be~~is administered ~~by the Board or~~ by a committee appointed by the Board (the ~~"Committee")~~“Committee”, which to the extent required in order to satisfy the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), shall consist solely of "Outside Directors" (as defined). When acting to administer the Program, the Board or the Committee is referred to as the "Program Administrator." For purposes of the Program, the term "Outside Director" shall mean a director who (a) is not a current employee of the Company or its subsidiaries; (b) is not a former employee of the Company or its subsidiaries who receives compensation for prior services (other than benefits under a tax-qualified retirement plan) during the then current taxable year; (c) has not been an officer of the Company or its subsidiaries; and (d) does not receive remuneration (which shall be deemed to include any payment in exchange for goods or services) from the Company or its subsidiaries, either directly or indirectly, in any capacity other than as a director, except as otherwise permitted under Code Section 162(m) and the regulations thereunder.“Program Administrator”). The Program Administrator has full discretion and authority to: (a) interpret the 2000 Program; (b) define its terms; (c) prescribe, amend and rescind rules and regulations relating to the 2000 Program; (d) select eligible individuals to receive options, stock appreciation rights, and performance shares under the 2000 Program; (e) determine when options, stock appreciation rights, or performance shares shall be granted under the Program; (f) determine the type, number, and terms and conditions of awards to be granted and the number of shares of stock to which awards will relate, and any other terms and conditions of options, stock appreciation rights, and performance shares; and (g) make all other determinations that may be necessary or advisable for the administration of the 2000 Program. ~~Any action~~

Types of ~~the Program Administrator is final, conclusive and binding on all parties in the Program and on their legal representatives, heirs and beneficiaries.~~ Awards

The Program provides that members of the Board or the Committee acting as the Program Administrator will not be liable for any act or determination taken or made in good faith in their capacities as such members and will be fully indemnified by the Company with respect to such acts and determinations. TYPES OF AWARDS The2000 Program is comprised of four parts: (i) the Incentive ~~Stock Option Plan ("~~Equity Compensation Program (“Incentive ~~Plan"~~Program”), (ii) the Supplemental ~~Stock Option Plan ("~~Equity Compensation Program (“Supplemental ~~Plan"~~Program”), (iii) the Stock Appreciation Rights ~~Plan ("~~Program (“SAR ~~Plan"~~Program”), and (iv) the Performance Share ~~Plan. INCENTIVE PLAN.~~Program.

Incentive Program. The Company intends that options granted pursuant to the provisions of the Incentive ~~Plan~~Program will qualify and will be identified as ~~"incentive~~“incentive stock ~~options" ("ISOs"~~options” (“ISOs”) within the meaning of Section 422 of the ~~Code.~~Internal Revenue Code of 1986, as amended (the “Code”). The Program Administrator may grant ISOs to purchase Common Stock to any employee of the Company or its subsidiaries. These options shall expire on the date determined by the Program Administrator, but they shall not expire later than 10 years from the date the options are granted. Any ISO granted to any person who owns more than 10% of the combined voting power of all classes of stock of the Company or any of its subsidiaries shall expire no later than 5 years from the date it was granted. 9

The exercise price of ISOs may not be less than the fair market value of the ~~Company's~~Company’s Common Stock on the date of grant. However, the exercise price of an ISO granted to a 10% or more stockholder may not be less than 110% of the fair market value of the ~~Company's~~Company’s Common Stock on the date of grant. The aggregate fair market value, determined at the time of grant, of the shares of Common Stock with respect to which ISOs are exercisable for the first time by an optionee during any calendar year may not exceed $100,000. ~~SUPPLEMENTAL PLAN.~~

Supplemental Program. Options granted under this Supplemental ~~Plan~~Program shall not be ISOs as defined in Section 422 of the Code. The Program Administrator may grant supplemental stock options to eligible participants in the 2000 Program. These options shall expire on the date determined by the Program Administrator, but they shall not expire later than 10 years from the date the options are granted. The exercise price of supplemental stock options shall be determined by the Program Administrator at the time of grant.

SAR ~~PLAN.~~Program. The Program Administrator may grant stock appreciation rights ~~("SARs"~~(“SARs”) to eligible participants in the 2000 Program. These SARs may be granted either together with supplemental stock options or ISOs ("(“Tandem ~~Options"~~Options”) or as naked stock appreciation rights ("(“Naked ~~Rights"~~Rights”). Tandem Options entitle the holder to receive from the Company an amount equal to the fair market value of the shares of Common Stock which the recipient would have been entitled to purchase on that date upon the surrender of the unexpired option, less the amount the recipient would have been required to pay to purchase the shares upon the exercise of the option. Naked Rights entitle the holder to receive the excess of fair market value of those rights at the end of a designated period over the fair market value of those rights when they are granted. Payments to recipients who exercise SARs may be made, at the discretion of the Program Administrator, in cash by bank check, in shares of Common Stock with a fair market value equal to the amount of payment, in a note in the payment amount, or any combination of these totaling the payment amount. ~~PERFORMANCE SHARE PLAN.~~

Performance Share Program. The Program Administrator may grant performance shares to eligible participants in the 2000 Program. Each grant confers upon the recipient the right to receive a specified number of shares of Common Stock of the Company contingent upon the achievement of specified performance objectives within a specified period (including the ~~recipient's~~recipient’s continued employment with or service to the Company).

Payment may be made, in the discretion of the Program Administrator, in shares of Common Stock, a check for the fair market value of the shares of Common Stock to which the performance share award relates (the ~~"payment amount"~~“payment amount”), a note in the payment amount, or any combination of these totaling the payment amount. The Program Administrator shall specify the performance objectives, determine the duration of the performance objective period (not to be less than 1 year nor more than 10 years from the date of the grant) and determine whether performance objectives have been met during the designated period. All determinations by the Program Administrator with respect to the achievement of performance objectives shall be final, binding on and conclusive with respect to each recipient. ~~EXERCISE~~

Exercise

Options may be exercised by providing written notice to the Company, specifying the number of shares to be purchased and accompanied by payment for such shares, and otherwise in accordance with the applicable option agreement. Payment may be made in cash, other shares of Common Stock or by a combination of cash 10 and shares. The Program Administrator may also permit cashless exercises pursuant to procedures approved by the Program Administrator. ~~VESTING OF OPTIONS~~

Vesting of Options

Unless otherwise provided by the Program Administrator at the time of grant or accelerated, stock options vest in 3 annual installments commencing one year after the date of grant. ~~TRANSFERABILITY OF AWARDS~~

Transferability of Awards

Grants of stock options and other awards are generally not transferable except by will or by the laws of descent and distribution, except that the Program Administrator may, in its discretion, permit transfers of supplemental stock options and/or stock appreciation rights granted in tandem with such options for estate planning or other purposes subject to any applicable restrictions under federal securities laws. Common Stock which represents ~~either~~ performance shares may not be sold, pledged, assigned or transferred in any manner prior to the satisfaction of the stated performance objectives and the expiration of the stated performance objective ~~periods may not be sold, pledged, assigned or transferred in any manner. AWARD LIMITATIONS~~ periods.

Award Limitations

The maximum number of shares of Common Stock subject to options, separately exercisable stock appreciation rights or other awards that an individual may receive in any calendar year is ~~400,000. ACCELERATION OF VESTING; CHANGE IN CONTROL~~ 800,000 if this amendment is adopted.

Acceleration of Vesting; Change in Control

The Program Administrator may, in its discretion, accelerate the exercisability of any option or stock appreciation right or provide that all restrictions, performance objectives, performance objective periods and risks of forfeiture pertaining to a performance share award shall lapse upon the occurrence of a ~~"change~~“change in control" of the Company. Each of the following constitutes a change in control under the Program: (i) the consummation of a merger or consolidation where the Company is not the surviving Company or in which the Company's shareholders before the transaction do not own 50% or more of the common stock of the surviving corporation immediately after the transaction; (ii) the sale or other disposition of all or substantially all of the assets of the Company; (iii) shareholder approval for a complete liquidation or dissolution of the Company; (iv) a purchase by a "person" within the meaning of Sections 13(d) of the Securities Exchange Act of 1934, as amended, by a corporation or by any other entity of any voting securitiescontrol” of the Company, ~~pursuant to a tender offer or exchange offer, unless~~as defined in the Board previously determined that such purchase would not be deemed a Change in Control for purposes of the Program; (v) a purchase by a person, corporation or other entity of beneficial ownership of at least 50% of the Company's voting securities, unless the Board previously determined that such purchase would not be deemed a Change in Control for purposes of the Program; or (vi) if the individuals who were members of the Board when the Program was adopted (the "Original Directors"), who 11 are thereafter elected to the Board and whose election, or nomination for election, to the Board was approved by the Original Directors then still in office ("Additional Original Directors"), and who thereafter are elected to the Board and whose election or nomination for election to the Board was approved by the Original Directors and Additional Original Directors then still in office, cease for any reason to constitute a majority of the members of the Board. 2000 Program.

If a change in control occurs pursuant to a merger or consolidation or sale of assets as described above, then each outstanding option, stock appreciation right, and performance share award shall be assumed or an equivalent benefit shall be substituted by the entity determined by the Board to be the successor corporation unless the successor does not so agree at least 15 days prior to the merger, consolidation or sale of assets. In that instance, each option, stock appreciation right, or performance share award shall be deemed to be fully vested and exercisable. ~~EFFECT OF TERMINATION OF EMPLOYMENT OR SERVICE AS A DIRECTOR OR CONSULTANT~~

Effect of Termination of Employment or Service as a Director or Consultant

Except as otherwise provided in any agreement evidencing an award or option:

(a) in the event that a ~~participant's~~participant’s employment or service with the Company is terminated for ~~"cause,"~~“cause,” any outstanding options and awards of such participant shall terminate immediately;

(b) in the event that a ~~participant's~~participant’s employment or service with the Company terminates due to death or disability (within the meaning of Section 22(e)(3) of the Code), all options and stock appreciation rights of such participant (other than Naked Rights) will lapse unless exercised, to the extent exercisable at the date of termination, within one year following such date of termination, all performance awards for which all performance objectives and conditions have been achieved and satisfied (other than continued employment or status as a consultant) shall be paid in full (any remaining awards of such participant will

be forfeited), and all Naked Rights shall be fully paid by the Company as of the date of death or disability; and

(c) in the event that a ~~participant's~~participant’s employment or service with the Company terminates for any other reason: (i) any outstanding options and awards (other than Naked Rights) shall be exercisable, to the extent exercisable on the date of termination, for a period of 90 days after the date of such termination if the recipient resigned, and 12 months after the date of such termination if it was an involuntary termination other than for cause; (ii) all Naked Rights not payable on the date of termination shall terminate immediately; and (iii) all performance share awards shall terminate immediately unless the performance objectives have been achieved and the performance objective period has expired. ~~AMENDMENT, SUSPENSION OR TERMINATION OF THE PROGRAM~~

Amendment, Suspension or Termination of the Program

The 2000 Program will terminate on the day preceding the tenth anniversary of its adoption, unless sooner terminated by the Board. Prior to that date, the Program Administrator may amend, modify, suspend or terminate the Program, provided, however, that (a) stockholder approval is obtained when required by law, and (b) no such amendment, modification, suspension or termination by the Program Administrator shall adversely affect the rights of participants, without their consent, under any outstanding option, stock appreciation right, or performance share. 12 ~~FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS AND AWARDS~~

Federal Income Tax Consequences of Options and Awards

BECAUSE OF THE COMPLEXITY OF THE FEDERAL INCOME TAX LAWS AND THE APPLICATION OF VARIOUS STATE INCOME TAX LAWS, THE FOLLOWING DISCUSSION OF TAX CONSEQUENCES IS GENERAL IN NATURE AND RELATES SOLELY TO FEDERAL INCOME TAX MATTERS. PARTICIPANTS OF THE2000PROGRAM ARE ADVISED TO CONSULT THEIR OWN PERSONAL TAX ADVISORS. IN ADDITION, THE FOLLOWING SUMMARY IS BASED UPON AN ANALYSIS OF THE INTERNAL REVENUE CODE AS CURRENTLY IN EFFECT, EXISTING LAWS, JUDICIAL DECISIONS, ADMINISTRATIVE RULINGS, REGULATIONS AND PROPOSED REGULATIONS, ALL OF WHICH ARE SUBJECT TO CHANGE. ~~ISOS.~~

Incentive Equity Compensation Program. In general, an optionee granted an ISO will not recognize taxable income upon the grant or the exercise of the ISO (assuming the ISO continues to qualify as such at the time of exercise). The excess of the fair market value of shares of Common Stock received upon exercise of the ISO over the exercise price is, however, a tax preference item which can result in imposition of the alternative minimum tax. The ~~optionee' s "tax basis"~~optionee’s “tax basis” in the shares of Common Stock acquired upon exercise of the ISO generally will be equal to the exercise price paid by the optionee, except in the case in which the optionee pays the exercise price by delivery of the shares of Common Stock otherwise owned by the optionee (as discussed below).

If the shares acquired upon the exercise of an ISO are held by the optionee for the ~~"ISO~~“ISO holding ~~period"~~period” of at least two years after the date of grant and one year after the date of exercise, the optionee will recognize long-term capital gain or loss upon the sale of the ISO Shares equal to the amount realized upon such sale minus the ~~optionee `s~~optionee’s tax basis in the shares, and such optionee will not recognize any

taxable ordinary income with respect to the ISO. As a general rule, if an optionee disposes of the shares acquired upon exercise of an ISO before satisfying both holding period requirements (a ~~"disqualifying disposition"~~“disqualifying disposition”), the gain recognized on the disposition will be taxed as ordinary income equal to the lesser of (i) the fair market value of the shares at the date of exercise of the ISO minus the ~~optionee `s~~optionee’s tax basis in the shares, or (ii) the amount realized upon the disposition minus the ~~optionee' s~~optionee’s tax basis in the shares. If the amount realized upon a disqualifying disposition is greater than the amount treated as ordinary income, the excess amount will be treated as capital gain for federal income tax purposes. Certain transactions are not considered disqualifying dispositions including certain exchanges, transfers resulting from the ~~optionee' s~~optionee’s death, and pledges and hypothecations of ISO ~~Shares. SUPPLEMENTAL STOCK OPTION PLAN. No~~shares. To the extent an optionee recognizes ordinary income by reason of a disqualifying disposition, the Company will generally be entitled (subject to the requirement of reasonableness and the provision of Code Section 162(m), as discussed below, to a corresponding tax deduction in the year in which the disqualifying disposition occurs.

Supplemental Equity Compensation Program. Generally, no income will be recognized to the optionee at the time of the grant of an option, nor will the Company be entitled to a tax deduction at that time. Upon the exercise of a supplemental stock option, the optionee will be subject to ordinary income tax equal to the excess of the fair market value of the stock on the exercise date over the exercise price. ~~The~~Subject to the requirement of reasonableness and the provisions of Code Section 162(m), as discussed below, the Company will be entitled to a tax deduction in an amount equal to the ordinary income realized by the optionee. If shares acquired upon such exercise are held for more than one year before disposition, any gain on disposition of such shares will be treated as long-term capital gain. ~~STOCK APPRECIATION RIGHT.~~

Stock Appreciation Rights Program. Neither the holder of a Tandem Option nor the holder of a Naked SAR will be deemed to receive any income at the time a SAR is granted. When any part of a SAR is exercised, the 13 optionee will be deemed to have received ordinary income on the exercise date in an amount equal to the sum of the fair market value of shares and cash received. ~~The~~Subject to the requirement of reasonableness and the provision of Code Section 162(m), as discussed below, the Company will be entitled to a corporate income tax deduction in an equal amount. Income recognized by an optionee upon the exercise of a SAR will be subject to federal withholding taxes. ~~PERFORMANCE SHARES.~~

Performance Share Program. In general, participants will not realize taxable income at the time of the grant of such an award. Participants will be subject to tax at ordinary income rates on the value of such awards when payment is received. If, however, an award is structured to permit a participant to postpone payment, the participant becomes taxable at ordinary income rates when payment is made available or the award is no longer subject to a substantial risk of forfeiture. If the award is paid in shares, taxable income will generally be the fair market value of the shares either at the time the award is made available or at the time any restrictions (including restrictions under Section 16b of the Exchange Act) subsequently lapse. ~~PERSONS SUBJECT TO LIABILITY UNDER SECTION 16(b) OF THE EXCHANGE ACT. Special rules apply under~~Subject to the requirement of reasonableness and the provision of Code ~~which may delay~~Section 162(m), as discussed below, the ~~timing and alter~~Company will be entitled to a corporate income tax deduction in an equal amount. Income recognized by an optionee upon the ~~amount~~exercise of ~~income recognized with respect to awards granted to persons~~a Performance Share will be subject to ~~liability under Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")~~federal withholding taxes.

Compensation Deduction Limitation. Such persons include directors, "officers" (as defined under Section 16 of the Exchange Act) and holders of more than 10% of the Company's outstanding Shares. COMPENSATION DEDUCTION LIMITATION. Code Section 162(m) generally disallows a public ~~company's~~company’s tax deduction for compensation paid to the Chief Executive Officer, or to any of the other four most highly compensated officers, in excess of $1.0 million in any tax year. Compensation that qualifies as ~~"performance-based compensation"~~“performance-based compensation” is excluded from the $1.0 million deductibility cap, if various requirements are satisfied. The Company intends that options and certain other awards granted to employees whom the Committee expects to be covered employees at the time a deduction arises in connection with such awards, qualify as ~~"performance-based~~“performance-based compensation,"” so that such awards will not be subject to the deductibility cap. WITHHOLDING. If the Company determines that the satisfaction of withholding tax or other withholding liabilities under any state or federal law is required as a condition of, or in any connection with, the exercise or delivery or purchase of shares pursuant to the exercise of any option, stock appreciation right or performance share under the Program, then the exercise of the option, stock appreciation right or performance share shall not be effective unless the withholding tax or other withholding liabilities shall have been satisfied in a manner acceptable to the Company.

The affirmative vote of a majority of the votes cast by the holders of shares entitled to vote thereon is required for approval of Proposal Three. If the stockholders do not vote for approval, the 1991 Program will expire in 2000 and no plan will be in place for an equity compensation program. Proxies will be voted in accordance with the specifications marked thereon, and, if no specification is made, will be voted "FOR" the acceptance of the Program. this proposal.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE ~~"FOR"~~FOR THE ~~PROPOSAL~~APPROVAL OF THE AMENDMENT TO ~~ADOPT~~ THE ~~COMPANY'S~~COMPANY’S 2000 EQUITY COMPENSATION ~~PROGRAM.~~ PROGRAM DESCRIBED ABOVE.

PROPOSAL FOUR ADOPTIONTHREE

ELECTION OF AMENDMENT TO THE INRAD, INC. KEY EMPLOYEE COMPENSATION PROGRAM DIRECTORS

At the Annual shareholders’ meeting held August 7, 2002 an amendment to our Certificate of Incorporation providing for the classification of our Board of Directors into three classes with staggered three-year terms of office was approved by the shareholders’ and implemented by the Board. The essence of the amendment was to allow the directors be divided into three separate classes designated Class I, Class II, and Class III. Initially, two Class I directors were elected for a three-year term of office, two Class II directors were elected for a two-year term of office, and one Class III director was elected for a one-year term of office. This year we are again required to elect each class of directors for staggered terms. Thereafter, when directors are elected at all subsequent Annual Meetings of Shareholders, they will be elected to three-year terms.

The following table sets forth the name and age of the current members of the Board of Directors, the principal occupation or employment of the director for the past five years, the principal business of the organization in which said occupation is or was carried on, the name or any other public corporation for which each director served as a Board member, and the period during which each director has served as a director of the Company.

The Board of Directors ~~proposes~~unanimously recommends that ~~stockholders approve an amendment (the "1991 Program Amendment"~~you vote for the election of Thomas Lenagh and Daniel Lehrfeld as Class I Directors for one year terms, J. Frank Wiedeman and Jan Winston as Class II Directors for three year terms, and John Rich as a Class III Director for a two year term.

		Positions; Business
Name and Age	Since	Experience
Thomas Lenagh, 78	1998	Chairman of the Board of Directors (May 2000 - Present). Management Consultant (1990 - Present) Past Chairman and CEO, Systems Planning Corporation Financial Vice President, the Aspen Institute Treasurer and Chief Investment Officer, The Ford Foundation Captain, US Navy Reserve (ret.)

Daniel Lehrfeld,	1999	Director
60		President and Chief Executive Officer (2000-present), President and Chief Operating Officer (1999-2000), Vice President/General Manager (1995-1999) Raytheon/GM Hughes Electro-Optics Center, President (1989-1991) New England Research Center, (subsidiary) Deputy General Manager (1989-1995) & Director, Business Development, International Business, Operations, Cryogenic Products Magnavox Electronic Systems E. Coast Div., Deputy Sector Director & Program Director Philips Laboratories Briarcliff North American Philips subs. Philips Electronics NV, Group Leader/Project Leader Grumman Aerospace Corporation

J. Frank Wiedeman,	1998	Director
88		Executive Director (1980 – Present) American Capital Management Inc.

Jan Winston	2000	Director
67		Principal (1997-Present) Winston Consulting, Division Director/General Manager (1981-1997) IBM Corporation. Executive positions held in Development, Finance and Marketing.

John Rich,	2000	Director
66		Vice President/General Manager (1999-2002) Power Electronics Division, C&D technologies President (1990-1999), Raytheon/GM Hughes Optical Systems Vice President (1983-1989), Perkin Elmer Microlithography, Electro-Optics, and Systems Colonel, Commander, Air Force Avionics Laboratory and Air Force Weapons Laboratory

Composition of the Board of Directors.

Since the adoption of the Sarbanes-Oxley Act in July 2002, there has been a growing public and regulatory focus on the independence of directors. Requirements relating to independence are imposed by the ~~Company's 1991 Key Employee Compensation Program (the "1991 Program"), adopted~~Sarbanes-Oxley Act with respect to members of the Audit Committee. The Board of Directors has determined that the members of the Audit Committee satisfy all such definitions of independence. During 2003, eight meetings of the Board of Directors were held. Each non-employee director is paid $500 for each Board Meeting they attend, and $250 for each conference call meeting they participate in. During 2003, each director attended or participated in all the Board of Director meetings held.

Audit Committee.

During 2003, the Audit Committee was comprised of 3 Directors. The Audit Committee is empowered by the Board ~~on May 5, 2000. A summary~~ of ~~certain terms~~Directors to, among other things, serve as an independent and objecti ve party to monitor the Company’s financial reporting process, internal control system and disclosure control system, review and appraise the audit efforts of the ~~1991 Program appears~~Company’s independent accountants, assume direct responsibility for the appointment, compensation, retention and oversight of the work of the outside auditors and for the resolution of disputes between the outside auditors and the Company’s management regarding financial reporting issues, and provide an open avenue of communication among the independent accountants, financial and senior management, and the Company’s Board of Directors.

AuditCommittee Financial Expert.

The Board of Directors of the Company has determined that Mr. John Rich is an “audit committee financial expert”, as such term is defined by the SEC. Mr. Rich, as well as Mr. Thomas Lenagh and Mr. Jan Winston, have been determined to be “independent” within the meaning of SEC regulations.

Report of the Audit Committee

The following is the report of the Audit Committee with respect to the Company’s audited financial statements for the fiscal year ended December 31, 2003, included in the ~~Company's Definitive Proxy Statement for its annual meeting of shareholders held~~Company’s Annual Report on ~~June 20, 1996, filed~~Form 10-K. The information contained in this report shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, ~~on May 21, 1996. PROPOSED AMENDMENT If~~nor shall such information be incorporated by reference into any future filing under the ~~1991 Program Amendment is approved,~~Securities Act of 1933, as amended, or the ~~first sentence~~Securities Exchange Act of ~~Section 1~~1934, as amended, except to the extent that the Company specifically incorporates it by reference in such filing.

Membership and Role of Audit Committee

Each of the ~~1991 Program would read in its entirety~~members of the Audit Committee is independent as ~~follows:~~defined under the National Association of Securities Dealers’ listing standards. The ~~Program shall be administered by~~Audit Committee operates under a ~~committee appointed~~written charter adopted by the Board of ~~Directors~~Directors.

Review with Management

The Audit Committee has reviewed and discussed the Company’s audited financial statements with management.

Review and Discussions with Independent Auditors

The Audit Committee has discussed with Holtz, Rubenstein & Company, LLP, the Company’s independent auditors, the matters required to be discussed by SAS 61 (Codification of Statements on Accounting Standards) which includes, among other items, matters related to the conduct of the ~~Corporation and composed solely of at least two members~~audit of the Board. If the 1991 Program Amendment is approved, the text of Section 4 of the 1991 Program would read in its entirety as follows: Article 4. ELIGIBILITY AND PARTICIPATION. All directors, officers, employees and consultants of the CorporationCompany’s financial statements.

The Audit Committee has also received written disclosures and the ~~Subsidiaries shall be eligible for selection~~letter from Holtz, Rubenstein & Company, LLP required by Independence Standards Board Standards No. 1 (which relates to the Program Administrators to participate in the Program. The term "employee" shall include any person who has agreed to become an employee and the term "consultant" shall include any person who has agreed to become a consultant. GENERAL EFFECT OF THE PROPOSED 1991 PROGRAM AMENDMENT AND REASONS FOR APPROVAL The proposed 1991 Program Amendment would remove the requirement that members of the Board serving on the committee to administer the 1991 Program not have been granted, during the 12 months preceding election to such committee, any options or performance shares under the 1991 Program or any equity securities pursuant to any other plan of the Company or its affiliates. The proposed 1991 Program Amendment would also expand the list of individuals eligible for selection by the Program Administrators to participate in all four plans of the 1991 Program to all directors, officers, employees and consultants of the Company and is subsidiaries. At present, (i) only regular full-time employees (including officers) ofaccountant’s independence from the Company and its ~~subsidiaries are eligible~~related entities) and has discussed with Holtz, Rubenstein & Company, LLP their independence from the Company.

Conclusion

Based on review and discussions referred to above, the Audit Committee recommended to the Company’s Board that the Company’s audited financial statements be included in the Company’s annual report on Form 10-K for ~~selection~~the fiscal year ended December 31, 2003.

Audit Committee

Jan Winston, Chairman

Tom Lenagh

John Rich

Procedures for Considering Nominations Made by Stockholders.

The Nominating Committee’s charter, as reflected in Exhibit C, describes procedures for nominations to ~~participate in any of~~be submitted by stockholders and other third-parties, other than candidates who have previously served on the ~~four 15~~ ~~plans, and (ii) directors~~Board or who are ~~not full-time employees~~recommended by the Board. The charter states that a nomination must be delivered to the Secretary of the Company at the principal executive offices of the Company not later than the close of business on the ninetieth (90th) day nor earlier than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that if the date of the annual meeting is more than thirty (30) days before or ~~its subsidiaries are~~more than sixty (60) days after such anniversary date, notice to be timely must be so delivered not ~~eligible~~earlier than the close of business on the one hundred twentieth (120th) day prior to ~~participate in Plans I~~such annual meeting and ~~IV.~~not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the close of business on the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Company. The ~~affirmative vote~~public announcement of an adjournment or postponement of an annual meeting will not commence a new time period (or extend any time period) for the giving of a ~~majority of~~notice as described above. The charter requires a nomination notice to set forth as to each person whom the ~~votes cast at the Annual Meeting~~proponent proposes to nominate for election as a director: (a) all information relating to such person that is required to ~~approve~~be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the ~~amendment~~Securities Exchange Act of 1934, as amended (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected), and (b) information that will enable the Nominating Committee to determine whether the candidate satisfies the criteria established by the Nominating Committee, as described below.

Qualifications. The charter describes the minimum qualifications for nominees and the qualities or skills that are necessary for directors to possess. Each nominee:

•must satisfy any legal requirements applicable to members of the Board;

•must have business or professional experience that will enable such nominee to provide useful input to the ~~1991 Program. Proxies~~Board in its deliberations;

•must have a reputation in the Company’s industry, for honesty and ethical conduct;

•must have a working knowledge of the types of responsibilities expected of members of a board of directors of a public corporation; and

• must have experience, either as a member of the board of directors of another public or private company or in another capacity, that demonstrates the nominee’s capacity to serve in a fiduciary position.

Identification and Evaluation of Candidates for the Board. Candidates to serve on the Board will be ~~voted~~identified from all available sources, including recommendations made by stockholders. The Nominating Committee’s charter provides that there will be no differences in ~~accordance~~the manner in which the Nominating Committee evaluates nominees recommended by stockholders and nominees recommended by the Committee or management, except that no specific process shall be mandated with respect to the nomination of any individuals who have previously served on the Board. The evaluation process for individuals other than existing Board members will include:

•a review of the information provided to the Nominating Committee by the proponent;

•a review of reference letters from at least two sources determined to be reputable by the Nominating Committee; and

•a personal interview of the candidate;

together with a review of such other information as the Nominating Committee shall determine to be relevant.

Third Party Recommendations. In connection with the ~~specifications marked thereon, and, if no specification is made, will be voted "FOR"~~2004 Annual Meeting, the ~~adoption~~Nominating Committee did not receive any nominations from any stockholder or group of stockholders which owned more than 5% of the amendment to the 1991 Program. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO ADOPT THE AMENDMENT TO THE COMPANY'S 1991 KEY EMPLOYEE COMPENSATION PROGRAM. 16 ~~EXECUTIVE OFFICERS The executive officers~~Company’s Common Stock for at least one year.”

Executive Compensation

Summary of ~~the Company are Daniel Lehrfeld, Maria Murray, William S. Miraglia, Relinda C. Walker,~~Cash and Devaunshi Sampat. Daniel Lehrfeld joined the Company in 1999 as President and Chief Operating Officer. In April 2000 he was appointed Chief Executive Officer. Prior to joining the Company, Mr. Lehrfeld held the position of Vice President and General Manager of the Electro-Optics Center, a division successively of the Raytheon, GM/Hughes Electronics and Magnavox Electronic Systems Corporation. He has also held executive positions with Philips Laboratories and Grumman Aerospace Corporation. Mr. Lehrfeld holds B.S. and M.S. degrees from Columbia University School of Engineering and Applied Science and an M.B.A. degree from the Columbia Graduate School of Business. Maria Murray joined the Company in January 1989, became Vice President of R&D Programs in 1993, and was appointed Sr. Vice President, Business Development in 1999. Prior to joining INRAD, she held positions in electronic design engineering in the laser and communication industries. She holds a B.S. degree in Electrical Engineering from the University of Central Florida. William S. Miraglia joined the Company as Secretary and Chief Financial Officer in June 1999. Previously, he held the position of Vice President of Finance for a division of UNC, Inc., a NYSE aviation company. Prior to his last position, Mr. Miraglia has held management positions in the aerospace industry and in public accounting. He holds a B.B.A. from Pace University, and an M.B.A from Long Island University and is a Certified Public Accountant. Relinda C. Walker joined the Company as Vice President, Manufacturing in May 1999. Previously, Ms. Walker held the position of Vice President at Instruments, SA where she directed a business unit. Ms. Walker holds a B.S. and M.S. in Mathematics from Emory University. Devaunshi Sampat joined the Company in 1998. In 1999 she was appointed Vice President of Marketing and Sales. Prior to joining the Company, Ms. Sampat held sales management positions within the Photonics industry with Princeton Instruments and Oriel Instruments. Ms. Sampat holds a B.S. in Medical Technology from the University of Bridgeport. Each of the executive officers has been elected by the Board of Directors to serve as an officer of the Company until the next election of officers, as provided in the Company's by-laws. 17 ~~EXECUTIVE COMPENSATION SUMMARY OF CASH AND OTHER COMPENSATION~~ Other Compensation

The following table sets forth, for the years ended December 31, ~~1999, 1998~~2003, 2002 and ~~1997,~~2001, the cash compensation paid by the Company and its ~~subsidiaries, to or~~Subsidiaries, with respect to the ~~Company's Officers,~~Company’s officers, whose total annual salary and bonus exceeded $100,000, for services rendered in all capacities as an executive officer during such period:
Name and Position STOCK - ----------------- ----- SALARY BONUS OPTIONS ------ ----- ------- Warren Ruderman, 1999 $130,000 none none Chairman and Chief 1998 $130,000 none none Executive Officer 1997 $130,000 none none Daniel Lehrfeld, 1999 $40,000* none 100,000 President and Chief 1998 N/A N/A N/A Operating Officer 1997 N/A N/A N/A Maria Murray, 1999 $110,000 9,500 30,000 Vice President, 1998 Less than $100,000 none none Business Development 1997 Less than $100,000 none 10,000 Devaunshi Sampat, 1999 Less than $111,000 22,600 20,000 Vice President, 1998 Less than $100,000 none 7500 Sales and Marketing 1997 Less than $100,000 none none
*

Summary Compensation ~~commencing~~Table

Name and Principal Position	Year	Salary		Bonus			Stock Options
Daniel Lehrfeld,	2003	$	156,000	$	—		85,000
President and	2002	148,000		32,500		*	110,000
Chief Executive Officer	2001	156,000		—			—

Maria Murray,	2003	112,000		—			40,000
Vice President,	2002	107,000		—			89,000
Special Projects	2001	115,000		—			—

Devaunshi Sampat,	2003	113,000		—			50,000
Vice President,	2002	105,000		—			59,500
Marketing Communications	2001	139,000		—			—

William Miraglia	2003	104,000		—			40,000
Vice President,	2002	101,000		—			45,000
Chief Financial Officer	2001	105,000		—			—

*Reflects deferred payout of bonus granted in recognition of asset sale in 2000. Full proceeds invested in Company Series B Preferred stock.

Executive Employment Contracts

The Company is party to an employment agreement with Mr. Dan Lehrfeld, President and CEO, that provides for a minimum annual salary during its term, and severance benefits under certain conditions that include change of control of the Company.

The aggregate minimum commitment under this agreement is as ~~of October 1999 Employment Date. (A) During the periods covered, no Officer~~follows:

Year Ending December 31,
2004	$	175,000
2005	$	175,000
2006	$	175,000
2007	$	175,000
2008	$	175,000

Should Mr. Lehrfeld be terminated without cause during this contract period he would be entitled to one year’s salary

There is an SEC requirement to report officer received perquisites ~~(i.e.,~~or other personal ~~benefits)~~benefits in excess of the lesser of $50,000 or 10% of such ~~individual's~~individual’s reported salary and bonus. 18 ~~CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS~~ During fiscal year 2003, 2002 and 2001, respectively, no officer received any perquisites or other personal benefits, nor were any granted.

Option Exercises and Holdings

The following table provides information concerning options exercised during 2003 and the value of unexercised options held by each of the executive officers named in the Summary Compensation Table at December 31, 2003.

Option Values at December 31, 2003

	Shares Acquired on Exercise	Value	Number of Securities Underlying Unexercised Options at December 31, 2003 (# of shares)		Value of In-the-Money Options at December 31, 2003 ($)(1)
Name	(# shares)	Realized	Exercisable	Unexercisable	Exercisable	Unexercisable

Daniel Lehrfeld	0	0	396,300	123,700	0	0

Maria Murray	0	0	106,370	83,630	0	0

Devaunshi Sampat	0	0	67,135	63,865	0	0

William Miraglia	0	0	29,504	59,496	0	0

(1) Based on $0.50 per share, the closing price of the Company’s Common Stock, as reported by the OTC Bulletin Board, on December 31, 2003.

Option/SAR Grants in Last Fiscal Year

Individual Grants							Grant Date Value
(a)	(b)	(c)		(d)		(e)	(f)
Name	Number of Securities Underlying Options/ SARs Granted	% of Total Options/ SARs Granted to Employees in Fiscal Year		Expiration or Base Price ($/Sh)		Expiration Date	Grant Date Payment Value ($)
Dan Lehrfeld	50,000	16.7	%	$	0.50	Jan 2013	$	0.48	(1)
Maria Murray	24,000	8.0	%	$	0.50	Jan 2013	$	0.48	(1)
Devaunshi Sampat	24,000	8.0	%	$	0.50	Jan 2013	$	0.48	(1)
William Miraglia	24,000	8.0	%	$	0.50	Jan 2013	$	0.48	(1)

(1). The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The following range of weighted-average assumptions were used for grants during the year ended December 31, ~~1999 approximately 6%~~2003:

Dividend yield	0.00	%
Volatility	127.16	%
Risk-free interest rate	5.2	%
Expected life	10 years

Compliance with Section 16(a) of the ~~Company's net product sales were through a foreign agent, in which Dr. Warren Ruderman a principal shareholder, has an investment. Terms~~Securities Exchange Act of sales to this foreign agent were substantially the same as to unrelated foreign agents. During 1999 Clarex Ltd., a principal shareowner and debt holder of the Company, purchased 500 shares of 10% convertible Preferred stock for $500,000. Such shares are convertible into 500,000 shares of Common Stock. During FY 2000, Clarex Ltd., a principal shareholder and debt holder of the Company, exercised 250,000 warrants at a price of $.6875 per share and 95,000 warrants at a price of $1.50 per share and received 345,000 shares of Common Stock of the Company. The same shareholder also converted a $250,000 secured convertible debenture into 200,000 shares of the Company's Common Stock. Also during 2000 William F. Nicklin, a shareholder, converted a $100,000 convertible debenture into 80,000 shares of the Company's Common Stock. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the ~~Company's~~Company’s directors and executive officers and persons who own more than ten percent of a registered class of the ~~Company's~~Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than ten percent stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

To the ~~Company's~~Company’s knowledge, based solely on the review of copies of reports and other information furnished to the Company, all Section 16(a) filing requirements applicable to the ~~Company's~~Company’s officers, directors and greater than ten percent ~~shareholders~~shareowners were complied with. 19

RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

Holtz Rubenstein & Company, LLP, (the “Auditors”) independent accountants, has been selected by the Board of Directors to examine and report on the financial statements of the Company for the fiscal year ending December 31, ~~2000. A representative~~2004.

Principal Accounting Fees and Services

In accordance with the requirements of ~~that firm~~the Sarbanes-Oxley Act of 2002 and the Audit Committee’s charter, all audit and audit-related work and all non-audit work performed by the Company’s independent accountants is approved in advance by the Audit Committee, including the proposed fees for such work. The Audit Committee is informed of each service actually rendered

Audit Fees. Audit fees billed or expected to be ~~present at~~billed to the Company by the Company’s principal accountant for the audit of the financial statements included in the Company’s Annual ~~Meeting~~Reports on Form 10-K, and ~~will have~~reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q, for the years ended December 31, 2003 and 2002 totaled approximately $74,000 and $71,000, respectively.

Audit-Related Fees. The Company was billed $0 and $0 by the Company’s principal accountant for the fiscal years ended December 31, 2003 and 2002, respectively, for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under the caption Audit Fees above.

Tax Fees. The Company was billed an ~~opportunity to make a statement if he so desires.~~aggregate of $7,500 and $7,500 by the Company’s principal accountant for the fiscal years ended December 31, 2003 and 2002, respectively, for tax services, principally the preparation of income tax returns.

All Other Fees. The ~~representative is expected~~Company did not incur any fees for the fiscal years ended December 31, 2003 and 2002, respectively, for permitted non-audit services.

Applicable law and regulations provide an exemption that permits certain services to be ~~available~~provided by the Company’s outside auditors even if they are not pre-approved. The Company has not relied on this exemption at any time since the Sarbanes-Oxley Act was enacted

Financial Information Systems Design Implementation Fees

The Auditors did not provide any of the professional services described in Paragraph (c)(4)(ii) of Rule 2-01 of the SEC’s Regulation S-X (in general, information technology services) during the year ended December 31, 2003.

All Other Fees

The Auditors did not provide any non-audit services, other than federal & state tax return preparation and review of the financial statements included in the Corporation’s Quarterly Reports on Form 10-Q filed during 2003, during the year ended December 31, 2003.

Other Matters

The Audit Committee of the Board of Directors has considered whether the provision of information technology services and other non-audit services is compatible with maintaining the independence of the Corporation’s principal accountant. The Company did not utilize such services during 2003.

Of the time expended by the Corporation’s principal accountant to ~~respond to appropriate questions from shareholders.~~ audit the Corporation’s financial statements for the year ended December 31, 2003, less than 50% of such time involved work performed by persons other than the principal accountant’s full-time, permanent employees.

/s/ Thomas Lenagh
Thomas Lenagh

/s/ John Rich
John Rich

/s/ Jan Winston
Jan Winston

OTHER MATTERS

At the time this Proxy Statement was mailed to shareholders, management was not aware that any other ~~matters would~~matter will be presented for action at the Annual Meeting. If other matters properly come before the Meeting, it is intended that the shares represented by proxies will be voted with respect to those matters in accordance with the best judgment of the persons voting them.

NOTICE REGARDING FILING OF ~~SHAREOWNER~~SHAREHOLDERS PROPOSALS

AT ~~2001~~2005 ANNUAL MEETING As

Any proposal intended to be presented by a ~~result~~shareholder at the 2005 Annual Meeting of ~~regulations issued~~Shareholders must be received by the ~~Securities and Exchange Commission,~~Company at the ~~Company must receive all shareowner proposals~~Company’s principal executive offices, 181 Legrand Avenue, Northvale, NJ 07647 no later than the close of business on March 22, 2005 to be considered for inclusion in the Proxy Statement for the ~~2001~~2005 Annual Meeting and by ~~February 22, 2001.~~ June 4, 2005 in order for the proposal to be considered timely for consideration at next years Annual Meeting (but not included in the Proxy Statement for such meeting).

		By Order of the Board of Directors


		William S. Miraglia, Secretary

Dated:	July 19, 2004

A copy of the ~~Board~~Company’s annual report for the fiscal year ended December 31, 2003, including consolidated financial statements, accompanies this Proxy Statement. The annual report is not to be regarded as proxy soliciting material or as a communication by means of ~~Directors William S. Miraglia, Secretary~~ which any solicitation is to be made.

Exhibit A

CERTIFICATE OF AMENDMENT

RESTATED CERTIFICATE OF INCORPORATION

PHOTONIC PRODUCTS GROUP, INC.

Pursuant to N.J.S. 14A:9-4(3)

Dated: July 24, 2000 - -------------------------------------------------------------------------------- A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999, INCLUDING CONSOLIDATED FINANCIAL STATEMENTS, ACCOMPANIES THIS PROXY STATEMENT. THE ANNUAL REPORT IS NOT TO BE REGARDED AS PROXY SOLICITING MATERIAL OR AS A COMMUNICATION BY MEANS OF WHICH ANY SOLICITATION IS TO BE MADE. 20 EXHIBIT A INRAD, INC. 2000 EQUITY COMPENSATION PROGRAM 1. PURPOSES. This INRAD, Inc. Equity Compensation Program (the "Program") is intended, 2004

The undersigned corporation, having adopted an amendment to ~~secure for INRAD, Inc. (the "Corporation"),~~ its ~~direct and indirect present and future subsidiaries, including without limitation any entity which~~Certificate of Incorporation, hereby certifies as follows:

1.The name of the Corporation ~~reasonably expects~~is Photonic Products Group, Inc.

2.The Corporation’s Restated Certificate of Incorporation is amended by changing the first paragraph of Article VI to ~~become a subsidiary (the "Subsidiaries"), and its shareholders, the benefits arising from ownership~~read as follows:

“Article VI

The total authorized capital stock of the ~~Corporation's~~Corporation shall be 61,000,000 shares, consisting of:

(1)1,000,000 shares of Preferred Stock, without par value; and

(2)60,000,000 shares of Common Stock, par value $.01 per ~~share ("Common Stock"), by those selected directors, officers, key employees and consultants~~share.”

3.The date of the Corporation and the Subsidiaries who are responsible for future growth. The Program is designed to help attract and retain superior individuals for positions of substantial responsibility with the Corporation and the Subsidiaries and to provide these persons with an additional incentive to contribute to the successadoption of the Corporation and the Subsidiaries. 2. ELEMENTS OF THE PROGRAM. In order to maintain flexibility in the award of benefits, the Program is comprised of four parts -- the Incentive Stock Option Plan ("Incentive Plan"), the Supplemental Stock Option Plan ("Supplemental Plan"), the Stock Appreciation Rights Plan ("SAR Plan"), and the Performance Share Plan ("Performance Share Plan"). Copies of the Incentive Plan, Supplemental Plan, SAR Plan, and Performance Plan are attached hereto as Parts I, II, III, and IV, respectively. Each such plan is referred to herein as a "Plan" and all such plans are collectively referred to herein as the "Plans." The grant of an option, stock appreciation right, or performance share under one of the Plans shall not be construed to prohibit the grant of an option, stock appreciation right or performance share under any of the other Plans. 3. APPLICABILITY OF GENERAL PROVISIONS. Unless any Plan specifically indicates to the contrary, all Plans shall be subject to the general provisions of the Program set forth below under the heading "General Provisions of the Equity Compensation Program" (the "General Provisions"). 21 ~~GENERAL PROVISIONS OF THE EQUITY COMPENSATION PROGRAM Article 1. ADMINISTRATION. The Program shall be administered~~amendment by the Board of Directors of the Corporation (the "Board" or the "Board of Directors") or any duly created committee appointed by the Board and charged with the administration of the Program. To the extent required in order to satisfy the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), such committee shall consist solely of "Outside Directors" (as defined herein). shareholders was August 25, 2004.

4.The Board, or any duly appointed committee, when acting to administer the Program, is referred to as the "Program Administrator". Any action of the Program Administrator shall be taken by majority vote at a meeting or by unanimous written consent of all members without a meeting. No Program Administrator or member of the Board of the Corporation shall be liable for any action or determination made in good faith with respect to the Program or with respect to any option, stock appreciation right, or performance share granted pursuant to the Program. For purposes of the Program, the term "Outside Director" shall mean a director who (a) is not a current employee of the Corporation or the Subsidiaries; (b) is not a former employee of the Corporation or the Subsidiaries who receives compensation for prior services (other than benefits under a tax-qualified retirement plan) during the then current taxable year; (c) has not been an officer of the Corporation or the Subsidiaries; and (d) does not receive remuneration (which shall be deemed to include any payment in exchange for goods or services) from the Corporation or the Subsidiaries, either directly or indirectly, in any capacity other than as a director, except as otherwise permitted under Code Section 162(m) and the regulations thereunder. Article 2. AUTHORITY OF PROGRAM ADMINISTRATOR. Subject to the other provisions of this Program, and with a view to effecting its purpose, the Program Administrator shall have the authority: (a) to construe and interpret the Program; (b) to define the terms used herein; (c) to prescribe, amend and rescind rules and regulations relating to the Program; (d) to determine the persons to whom options, stock appreciation rights, and performance shares shall be granted under the Program; (e) to determine the time or times at which options, stock appreciation rights, or performance shares shall be granted under the Program; (f) to determine the number of shares ~~subject~~entitled to ~~any option or stock appreciation right under~~vote on the ~~Program and the~~amendment were ,

5.The number of shares voted for and against the amendment were as follows:

For:

Against:

6.The effective date of this amendment (the effective date) is August , 2004.

IN WITNESS WHEREOF, the undersigned corporation has caused this Certificate to be awarded as performance shares under the Program as well as the option price, and the duration of each option, stock appreciation right, and performance share, and any other terms and conditions of options, stock appreciation rights, and performance shares; and (g) to make any other determinations necessary or advisable for the administration of the Program and to do everything necessary or appropriate to administer the Program. All decisions, determinations and interpretations madeexecuted on its behalf by the Program Administrator shall be binding and conclusive on all participants in the Program and on their legal representatives, heirs and beneficiaries. Article 3. MAXIMUM NUMBER OF SHARES SUBJECT TO THE PROGRAM. The maximum aggregate number of shares of Common Stock issuable pursuant to the Program shall be 1,500,000 shares. No one person participating in the Program may receive options, separately exercisable stock appreciation rights or other awards for more than 400,000 shares of Common Stock in any calendar year. All such shares may be issued under any Plan, which is part of the Program. If any of the options (including incentive stock options) or stock appreciation rights granted under the Program expire or terminate for any reason before they have been exercised in full, the unissued shares subject to those expired or terminated options and/or stock appreciation rights shall again be available for purposes of the Program. If the performance objectives associated with the grant of any performance shares are not achieved within the specified performance objective period or if the performance share grant terminates for any reason before the performance objective date arrives, the shares of Common Stock associated with such performance shares shall again be available for purposes of the Program. Any shares of Common Stock delivered pursuant to the Program may consist, in whole or in part, ofits duly authorized and unissued shares or treasury shares. Article 4. ELIGIBILITY AND PARTICIPATION. All directors, officers, employees and consultants of the Corporation and the Subsidiaries shall be eligible to participate in the Program. The term "employee" shall include any person who has agreed to become an employee and the term "consultant" shall include any person who has agreed to become a consultant. Article 5. EFFECTIVE DATE AND TERM OF PROGRAM. The Program shall become effective May 5, 2000 upon approval of the Program by the Board of Directors of the Corporation, subject to approval of the Program by the shareholders of the Corporation within twelve months after the date of approval of the Program by the Board of Directors. The Program shall continue in effect for a term of ten years from the date that the Program is adopted by the Board of Directors, unless sooner terminated by the Board of Directors of the Corporation. 22 Article 6. ADJUSTMENTS. In the event that the outstanding shares of Common Stock of the Corporation are hereafter increased, decreased, changed into or exchanged for a different number or kind of shares or securities through merger, consolidation, combination, exchange of shares, other reorganization, recapitalization, reclassification, stock dividend, stock split or reverse stock split (an "Adjustment Event"), an appropriate and proportionate adjustment shall be made by the Program Administrator in the maximum number and kind of shares as to which options, stock appreciation rights, and performance shares may be granted under the Program. A corresponding adjustment changing the number or kind of shares allocated to unexercised options, stock appreciation rights, and performance shares or portions thereof, which shall have been granted prior to any such Adjustment Event, shall likewise be made. Any such adjustment in outstanding options and stock appreciation rights shall be made without change in the aggregate purchase price applicable to the unexercised portion of the option or stock appreciation right but with a corresponding adjustment in the price for each share or other unit of any security covered by the option or stock appreciation right. In making any adjustment pursuant to this Article 6, any fractional shares shall be disregarded. Article 7. TERMINATION AND AMENDMENT OF PROGRAM AND AWARDS. No options, stock appreciation rights or performance shares shall be granted under the Program after the termination of the Program. The Program Administrator may at any time amend or revise the terms of the Program or of any outstanding option, stock appreciation right or performance share issued under the Program, provided, however, that (a) any shareholder approval required by applicable law or regulation shall be obtained and (b) no amendment, suspension or termination of the Program or of any outstanding option, stock appreciation right or performance share shall, without the consent of the person who has received an option, stock appreciation right, or performance share, impair any of that person's rights or obligations under such option, stock appreciation right or performance share. Article 8. PRIVILEGES OF STOCK OWNERSHIP. Notwithstanding the exercise of any option or stock appreciation rights granted pursuant to the terms of the Program or the achievement of any performance objective specified in any performance share granted pursuant to the terms of the Program, no person shall have any of the rights or privileges of a stockholder of the Corporation in respect of any shares of stock issuable upon the exercise of his or her option or stock appreciation right or achievement of his or her performance objective until certificates representing the shares of Common Stock covered thereby have been issued and delivered. No adjustment shall be made for dividends or any other distributions for which the record date is prior to the date on which any stock certificate is issued pursuant to the Program. Article 9. RESERVATION OF SHARES OF COMMON STOCK. During the term of the Program, the Corporation will at all times reserve and keep available such number of shares of its Common Stock as shall be sufficient to satisfy the requirements of the Program. Article 10. TAX WITHHOLDING. The exercise of any option, stock appreciation right or performance share under the Program is subject to the condition that, if at any time the Corporation shall determine, in its discretion, that the satisfaction of withholding tax or other withholding liabilities under any state or federal law is necessary or desirable as a condition of, or in any connection with, such exercise or the delivery or purchase of shares pursuant thereto, then, in such event, the exercise of the option, stock appreciation right or performance share shall not be effective unless such withholding tax or other withholding liabilities shall have been satisfied in a manner acceptable to the Corporation. Article 11. EMPLOYMENT; SERVICE AS A CONSULTANT OR DIRECTOR. Nothing in the Program gives to any person any right to continued employment by the Corporation or the Subsidiaries or to continued service as a consultant to or director of the Corporation or the Subsidiaries or limits in any way the right of the Corporation or the Subsidiaries at any time to terminate or alter the terms of that employment or service. Article 12. INVESTMENT LETTER; RESTRICTIONS ON OBLIGATION OF THE CORPORATION TO ISSUE SECURITIES; RESTRICTIVE LEGEND. Any person acquiring or receiving Common Stock or other securities of the Corporation pursuant to the Program, as a condition precedent to receiving the shares of Common Stock or other securities, may be required by the Program Administrator to submit a letter to the Corporation stating that the shares of Common Stock or other securities are being acquired for investment and not with a view to the distribution thereof. The Corporation shall not be obligated to sell or issue any shares of Common Stock or other securities pursuant to the Program unless, on the date of sale and issuance thereof, the shares of Common Stock or other securities are either registered under the Securities Act of 1933, as amended, and all applicable state securities laws, or exempt from registration thereunder. All shares of Common Stock 23 and other securities issued pursuant to the Program shall bear a restrictive legend referring to any restrictions on transferability applicable thereto, including those imposed by federal and state securities laws. Article 13. RIGHTS UPON TERMINATION OF EMPLOYMENT, SERVICE AS A CONSULTANT OR SERVICE AS A DIRECTOR. Notwithstanding any other provision of the Program, any benefit granted to an individual who has agreed to become an employee or a consultant of the Corporation or any Subsidiary or to become an employee of any entity which the Corporation reasonably expects to become a Subsidiary, shall immediately terminate if the Program Administrator determines, in its sole discretion, that such person will not become an employee or consultant of the Corporation or any Subsidiary. If a recipient ceases to be employed by or to provide consulting services or services as a director to the Corporation or any Subsidiary, or a corporation or a parent or subsidiary of such corporation issuing or assuming a stock option in a transaction to which Section 424(a) of the Code applies, for any reason other than death or disability, then, unless any other provision of the Program provides for earlier termination or the Option grant agreement provides otherwise: (a) all options and stock appreciation rights (other than "Naked Rights", as hereinafter defined) shall terminate immediately in the event the recipient's employment or consulting services are terminated for cause and shall be exercisable, to the extent exercisable on the date of termination, for a period of: (i) 90 days after the date of such termination if such termination is due to the recipient's resignation; and (ii) 12 months after the date of such termination if such termination is due to the involuntary termination of the recipient's service or employment other than for cause. (b) subject to Section 5(b) of the SAR Plan, all Naked Rights not payable on the date of termination shall terminate immediately; and (c) all performance share awards shall terminate immediately unless the performance objectives have been achieved and the performance objective period has expired. Article 14. RIGHTS UPON DISABILITY. If a recipient becomes disabled within the meaning of Section 22(e)(3) of the Code while employed by or while rendering consulting services or services as a director to the Corporation or any Subsidiary (or a corporation or a parent or subsidiary of such corporation issuing or assuming a stock option in a transaction to which Section 424(a) of the Code applies), then, unless any other provision of the Program provides for earlier termination or the Option grant agreement provides otherwise: (a) all options and stock appreciation rights (other than Naked Rights) may be exercised, to the extent exercisable on the date of termination,, at any time within one year after the date of termination due to disability; (b) all Naked Rights shall be fully paid by the Corporationofficer as of the date of disability; and (c) all performance share awards for which all performance objectives have been achieved (other than continued employment or status as a consultant on the Vesting Date) shall be paid in full by the Corporation; all other performance shares shall terminate immediately. Article 15. RIGHTS UPON DEATH. If a recipient dies while employed by or while rendering consulting services or services as a director to the Corporation or any Subsidiary (or a corporation or a parent or subsidiary of such corporation issuing or assuming a stock option in a transaction to which Section 424(a) of the Code applies), then, unless any other provision of the Program provides for earlier termination or the Option grant agreement provides otherwise: (a) all options and stock appreciation rights (other than Naked Rights) may be exercised by the person or persons to whom the recipient's rights shall pass by will or by the laws of descent and distribution, to the extent exercisable on the date of death,, at any time within one year after the date of death unless any other provision of the Program provides for earlier termination; 24 (b) all Naked Rights shall be fully paid by the Corporation as of the date of death; and (c) all performance share awards for which all performance objectives have been achieved (other than continued employment or status as a consultant on the Vesting Date) shall be paid in full by the Corporation; all other performance share awards shall terminate immediately. Article 16. NON-TRANSFERABILITY. Options and stock appreciation rights granted under the Program may not be sold, pledged, assigned or transferred in any manner by the recipient otherwise than by will or by the laws of descent and distribution and shall be exercisable (a) during the recipient's lifetime only by the recipient and (b) after the recipient's death only by the recipient's executor, administrator or personal representative, provided, however that the Program Administrator may permit the recipient of an option granted pursuant to Part II of the Program to transfer options and/or stock appreciation rights granted in tandem with such options to a family member or a trust or partnership created for the benefit of family members. In the case of such a transfer, the transferee's rights and obligations with respect to the applicable options or stock appreciation rights shall be determined by reference to the recipient and the recipient's rights and obligations with respect to the applicable options or stock appreciation rights had no transfer been made. The recipient shall remain obligated pursuant to Articles 10 and 12 hereunder if required by applicable law. Common Stock, which represents either performance, shares prior to the satisfaction of the stated performance objectives and the expiration of the stated performance objective periods may not be sold, pledged, assigned or transferred in any manner. Article 17 CHANGE IN CONTROL. The Program Administrator shall have the authority to provide, either at the time that any option or any stock appreciation right or performance share is granted or thereafter, that such option or stock appreciation right shall become fully exercisable upon the occurrence of a Change in Control Event or that all restrictions, performance objectives, performance objective periods and risks of forfeiture pertaining to a performance share or stock bonus award shall lapse upon the occurrence of a Change in Control Event. As used in the Program, a "Change in Control Event" shall be deemed to have occurred if any of the following events occur: (a) the consummation of any consolidation or merger of the Corporation in which the Corporation is not the continuing or surviving corporation or any consolidation or merger in which the holders of the Corporation's Shares immediately prior to the consolidation or merger do not own fifty percent (50%) or more of the common stock of the surviving corporation immediately after the consolidation or merger; or (b) the consummation of any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Corporation, other than to a subsidiary or affiliate; or (c) an approval by the shareholders of the Corporation of any plan or proposal for the liquidation or dissolution of the Corporation; or (d) (A) a purchase by any person (as such term is defined in Section 13(d) of the Exchange Act), corporation or other entity of any voting securities of the Corporation (the "Voting Securities") (or securities convertible into Voting Securities) for cash, securities or any other consideration pursuant to a tender offer or exchange offer, unless, prior to the making of such purchase of Voting Securities (or securities convertible into Voting Securities), the Board shall determine that the making of such purchase shall not be deemed a Change in Control for purposes of the Program, or (B) any action pursuant to which any person (as such term is defined in Section 13(d) of the Exchange Act), corporation or other entity (other than the Corporation or any benefit plan sponsored by the Corporation or any of its subsidiaries) shall become the "beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing fifty percent (50%) or more of the combined voting power of the Corporation's then 25 outstanding Voting Securities ordinarily (and apart from any rights accruing under special circumstances) having the right to vote in the election of directors (calculated as provided in Rule 13d-3(d) in the case of rights to acquire any such securities), unless, prior to such person so becoming such beneficial owner, the Board shall determine that such person so becoming such beneficial owner shall not be deemed to constitute a Change in Control for purposes of the Program; or (e) the individuals (A) who, as of the date on which the Program is first adopted by the Board of Directors, constitute the Board (the "Original Directors") and (B) who thereafter are elected to the Board and whose election, or nomination for election, to the Board was approved by a vote of at least two thirds of the Original Directors then still in office (such Directors being called "Additional Original Directors") and (C) who thereafter are elected to the Board and whose election or nomination for election to the Board was approved by a vote of at least two thirds of the Original Directors and Additional Original Directors then still in office, cease for any reason to constitute a majority of the members of the Board. Article 18. MERGER OR ASSET SALE. For purposes of the Program, a merger or consolidation which would constitute a Change in Control Event pursuant to Article 17 and a sale of assets which would constitute a Change in Control Event pursuant to Article 17 are hereinafter referred to as "Article 18 Events". In the event of an Article 18 Event, each outstanding option, stock appreciation right, and performance share award shall be assumed or an equivalent benefit shall be substituted by the entity determined by the Board of Directors of the Corporation to be the successor corporation. However, in the event that any such successor corporation does not agree in writing, at least 15 days prior to the anticipated date of consummation of such Article 18 Event, to assume or so substitute each such option, stock appreciation right, and performance share award, each option, stock appreciation right, or performance share award not so assumed or substituted shall be deemed to be fully vested and exercisable. If an option, stock appreciation right or performance share award becomes fully vested and exercisable pursuant to the terms of this Article 18, the Program Administrator shall notify the holder thereof in writing or electronically that (a) such holder's option, stock appreciation right or performance share award shall be fully exercisable until immediately prior to the consummation of such Article 18 Event and (b) such holder's option, stock appreciation right or performance share award shall terminate upon the consummation of such Article 18 Event. For purposes of this Article 18, an option, stock appreciation right or performance share award shall be considered assumed if, following consummation of the applicable Article 18 Event, the option, stock appreciation right or performance share award confers the right to purchase or receive, for each share of Common Stock subject to the option, stock appreciation right or performance share award immediately prior to the consummation of such Article 18 Event, the consideration (whether stock, cash or other securities or property) received in such Article 18 Event by holders of Common Stock for each share of Common Stock held on the effective date of such Article 18 Event (and, if holders of Common Stock are offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if such consideration received in such Article 18 Event is not solely common stock of such successor, the Program Administrator may, with the consent of such successor corporation, provide for the consideration to be received in connection with such option, stock appreciation right or performance share award to be solely common stock of such successor equal in fair market value to the per share consideration received by holders of Common Stock in the Article 18 Event. Article 19. METHOD OF EXERCISE. Any optionee may exercise his or her option from time to time by giving written notice thereof to the Corporation at its principal office together with payment in full for the shares of Common Stock to be purchased. The date of such exercise shall be the date on which the Corporation receives such notice. Such notice shall state the number of shares to be purchased. The purchase price of any shares purchased upon the exercise of any option granted pursuant to the Program shall be paid in full at the time of exercise of the option by certified or bank cashier's check payable to the order of the Corporation, by tender of shares of Common Stock which have a Fair Market Value on the date of tender equal to the purchase price, or by a combination of checks and shares of Common Stock; provided however that any shares of Common Stock so tendered shall have been owned by the optionee for a period of least six months free of any substantial risk of forfeiture or were purchased on the open market without assistance, direct or indirect, from the Corporation. The Program Administrator shall, subject to such rules and procedures as the Program Administrator may prescribe, permit an optionee to make "cashless exercise" arrangements, to the extent permitted by applicable law, and may require optionees to utilize the services of a single broker selected by the Program Administrator in connection with any cashless exercise. No option may be exercised for a fraction of a share of Common Stock. If any 26 portion of the purchase price is paid in shares of Common Stock, those shares shall be valued at their then Fair Market Value as determined by the Program Administrator in accordance with Section 4 of the Incentive Plan. Article 20. TEN-YEAR LIMITATIONS. Notwithstanding any other provision of the Program, (a) no option may be granted pursuant to the Program more than ten years after the date on which the Program was adopted by the Board of Directors and (b) any option granted under the Program shall, by its terms, not be exercisable more than ten years after the date of grant. Article 21. SUNDAY OR HOLIDAY. In the event that the time for the performance of any action or the giving of any notice is called for under the Program within a period of time which ends or falls on a Sunday or legal holiday, such period shall be deemed to end or fall on the next day following such Sunday or legal holiday which is not a Sunday or legal holiday. Article 22. GOVERNING LAW. The Program shall be governed by and construed in accordance with the laws of the State of New Jersey. Article 23. POOLING TRANSACTIONS. Notwithstanding anything contained in the Program to the contrary, in the event of a Change in Control which is also intended to constitute a Pooling Transaction (as defined herein), the Program Administrator shall take such actions, if any, which are specifically recommended by an independent accounting firm retained by the Corporation to the extent reasonably necessary in order to assure that the Pooling Transaction will qualify as such, including but not limited to (a) deferring the vesting, exercise, payment or settlement with respect to any benefit granted under the Program, (b) providing that the payment or settlement in respect of any such benefit be made in the form of cash, Shares or securities of a successor or acquirer of the Corporation, or a combination of the foregoing and (c) providing for the extension of the term of any such benefit to the extent necessary to accommodate the foregoing, but not beyond the maximum term permitted for any such benefit. For purposes of the Program, the term "Pooling Transaction" shall mean an acquisition of the Corporation in a transaction that is intended to be treated as a "pooling of interests" under generally accepted accounting principles. Article 24. COVENANT AGAINST COMPETITION. The Program Administrator shall have the right to condition the award to an employee of the Corporation or the Subsidiaries of any option, stock appreciation right or performance share under the Program upon the recipient's execution and delivery to the Corporation of an agreement in a form satisfactory to the Program Administrator containing such non-compete, non-solicitation and non-disclosure terms as shall be determined by the Program Administrator. 27 PART I INCENTIVE STOCK OPTION PLAN The following provisions shall apply with respect to options granted by the Program Administrator pursuant to Part I of the Program: Section 1. GENERAL. This Incentive Stock Option Plan ("Incentive Plan") is Part I of the Corporation's Program. The Corporation intends that options granted pursuant to the provisions of the Incentive Plan will qualify and will be identified as "incentive stock options" within the meaning of Section 422 of the Code. Unless any provision herein indicates to the contrary, this Incentive Plan shall be subject to the General Provisions of the Program. Section 2. TERMS AND CONDITIONS. The Program Administrator may grant incentive stock options to purchase Common Stock to any employee of the Corporation or its Subsidiaries. The terms and conditions of options granted under the Incentive Plan may differ from one another as the Program Administrator shall, in its discretion, determine, as long as all options granted under the Incentive Plan satisfy the requirements of the Incentive Plan. Section 3. DURATION OF OPTIONS. Each option and all rights thereunder granted pursuant to the terms of the Incentive Plan shall expire on the date determined by the Program Administrator, but in no event shall any option granted under the Incentive Plan expire later than ten years from the date on which the option is granted. Notwithstanding the foregoing, any option granted under the Incentive Plan to any person who owns more than 10% of the combined voting power of all classes of stock of the Corporation or any Subsidiary shall expire no later than five years from the date on which the option is granted. Section 4. PURCHASE PRICE. The option price with respect to any option granted pursuant to the Incentive Plan shall not be less than the Fair Market Value of the shares on the date of the grant of the option; except that the option price with respect to any option granted pursuant to the Incentive Plan to any person who owns more than 10% of the combined voting power of all classes of stock of the Corporation shall not be less than 110% of the Fair Market Value of the shares on the date the option is granted. For purposes of the Program, the phrase "Fair Market Value" shall mean the fair market value of the Common Stock on the date of grant or other relevant date. If on such date the Common Stock is listed on a stock exchange or is quoted on the automated quotation system of NASDAQ, the Fair Market Value shall be the closing sale price (or if such price is unavailable, the average of the high bid price and the low asked price) of a share of Common Stock on such date. If no such closing sale price or bid and asked prices are available, the Fair Market Value shall be determined in good faith by the Program Administrator in accordance with generally accepted valuation principles and such other factors as the Program Administrator reasonably deems relevant. Section 5. MAXIMUM AMOUNT OF OPTIONS IN ANY CALENDAR YEAR. The aggregate Fair Market Value (determined as of the time the option is granted) of the Common Stock with respect to which incentive stock options are exercisable for the first time by any employee during any calendar year (under the terms of the Incentive Plan and all incentive stock option plans of the Corporation and the Subsidiaries) shall not exceed $100,000. 28 Section 6. EXERCISE OF OPTIONS. Unless otherwise provided by the Program Administrator at the time of grant or unless the installment provisions set forth herein are subsequently accelerated pursuant to the General Provisions of the Program or otherwise by the Program Administrator with respect to any one or more previously granted options, incentive stock options may only be exercised to the following extent during the following periods of time:
Maximum Percentage of Shares Covered by Option That May be During Purchased ------ --------- First 12 months after grant 0 First 24 months after grant 33-1/3% First 36 months after grant 66-2/3% Beyond 36 months after grant 100%
Section 7. FAILURE TO SATISFY APPLICABLE REQUIREMENTS. In the event that an option is intended to be granted pursuant to the provisions of this Incentive Plan but fails to satisfy one or more requirements of this Incentive Plan, such option shall be deemed to have been granted pursuant to the Supplemental Plan set forth as Part II of the Program, provided that such option satisfies the requirements of the Supplemental Plan. 29 PART II SUPPLEMENTAL STOCK OPTION PLAN The following provisions shall apply with respect to options granted by the Program Administrator pursuant to Part II of the Program: Section 1. GENERAL. This Supplemental Stock Option Plan ("Supplemental Plan") is Part II of the Corporation's Program. Any option granted pursuant to this Supplemental Plan shall not be an incentive stock option as defined in Section 422 of the Code. Unless any provision herein indicates to the contrary, this Supplemental Plan shall be subject to the General Provisions of the Program. Section 2. TERMS AND CONDITIONS. The Program Administrator may grant supplemental stock options to any person eligible under Article 4 of the General Provisions. The terms and conditions of options granted under this Supplemental Plan may differ from one another as the Program Administrator shall, in its discretion, determine as long as all options granted under this Supplemental Plan satisfy the requirements of this Supplemental Plan. Section 3. DURATION OF OPTIONS. Each option and all rights thereunder granted pursuant to the terms of this Supplemental Plan shall expire on the date determined by the Program Administrator, but in no event shall any option granted under this Supplemental Plan expire later than ten years from the date on which the option is granted. Section 4. PURCHASE PRICE. The option price with respect to any option granted pursuant to this Supplemental Plan shall be determined by the Program Administrator at the time of grant. Section 5. EXERCISE OF OPTIONS. Unless otherwise provided by the Program Administrator at the time of grant or unless the installment provisions set forth herein are subsequently accelerated pursuant to the General Provisions of the Program or otherwise by the Program Administrator with respect to any one or more previously granted options, incentive stock options may only be exercised to the following extent during the following periods of time:
Maximum Percentage of Shares Covered by Option That May be During Purchased ------ --------- First 12 months after grant 0 First 24 months after grant 33-1/3% First 36 months after grant 66-2/3% Beyond 36 months after grant 100%
30 PART III STOCK APPRECIATION RIGHTS PLAN The following provisions shall apply with respect to stock appreciation rights granted by the Program Administrator pursuant to Part III of the Program: Section 1. GENERAL. This Stock Appreciation Rights Plan ("SAR Plan") is Part III of the Corporation's Program. Section 2. TERMS AND CONDITIONS. The Program Administrator may grant stock appreciation rights to any person eligible under Article 4 of the General Provisions. Stock appreciation rights may be granted either in tandem with supplemental stock options or incentive stock options as described in Section 4 of this SAR Plan or as naked stock appreciation rights as described in Section 5 of this SAR Plan. Section 3. MODE OF PAYMENT. At the discretion of the Program Administrator, payments to recipients upon exercise of stock appreciation rights may be made in (a) cash by bank check, (b) shares of Common Stock having a Fair Market Value (determined in the manner provided in Section 4 of the Incentive Plan) equal to the amount of the payment, (c) a note in the amount of the payment containing such terms as are approved by the Program Administrator or (d) any combination of the foregoing in an aggregate amount equal to the amount of the payment. Section 4. STOCK APPRECIATION RIGHT IN TANDEM WITH SUPPLEMENTAL OR INCENTIVE STOCK OPTION. A SAR granted in tandem with a supplemental stock option or an incentive stock option (in either case, an "Option") shall be on the following terms and conditions: (a) Each SAR shall relate to a specific Option or portion of an Option granted under the Supplemental Plan or Incentive Plan, as the case may be, and may be granted by the Program Administrator at the same time that the Option is granted or at any time thereafter prior to the last day on which the Option may be exercised. (b) A SAR shall entitle a recipient, upon surrender of the unexpired related Option, or a portion thereof, to receive from the Corporation an amount equal to the excess of (i) the Fair Market Value (determined in accordance with Section 4 of the Incentive Plan) of the shares of Common Stock which the recipient would have been entitled to purchase on that date pursuant to the portion of the Option surrendered over (ii) the amount which the recipient would have been required to pay to purchase such shares upon exercise of such Option. (c) A SAR shall be exercisable only for the same number of shares of Common Stock, and only at the same times, as the Option to which it relates. SARs shall be subject to such other terms and conditions as the Program Administrator may specify. (d) A SAR shall lapse at such time as the related Option is exercised or lapses pursuant to the terms of the Program. On exercise of the SAR, the related Option shall lapse as to the number of shares exercised. Section 5. NAKED STOCK APPRECIATION RIGHT. SARs granted by the Program Administrator as naked stock appreciation rights ("Naked Rights") shall be subject to the following terms and conditions: (a) The Program Administrator may award Naked Rights to recipients for periods not exceeding ten years. Each Naked Right shall represent the right to receive the excess of the Fair Market Value of one share of Common Stock (determined in accordance with Section 4 of the Incentive Plan) on the date of exercise of the Naked Right over the Fair Market Value of one share of Common Stock (determined in accordance with Section 4 of the Incentive Plan) on the date the Naked Right was awarded to the recipient. (b) Unless otherwise provided by the Program Administrator at the time of award or unless the installment provisions set forth herein are subsequently accelerated pursuant to the General Provisions of the Program or otherwise by the Program Administrator with respect to any one or more previously granted Naked 31 ~~Rights, Naked Rights may only be exercised to the following extent during the following periods of employment or service as a consultant or director:~~
Maximum Percentage of Naked Rights Which During May be Exercised ------ ---------------- First 12 months after award 0% First 24 months after award 33-1/3% First 36 months after award 66-2/3% Beyond 36 months after award 100%
(c) The Naked Rights solely measure and determine the amounts to be paid to recipients upon exercise as provided in Section 5(a). Naked Rights do not represent Common Stock or any right to receive Common Stock. The Corporation shall not hold in trust or otherwise segregate amounts which may become payable to recipients of Naked Rights; such funds shall be part of the general funds of the Corporation. Naked Rights shall constitute an unfunded contingent promise to make future payments to the recipient. 32 PART IV PERFORMANCE SHARE PLAN The following provisions shall apply with respect to performance shares granted by the Program Administrator pursuant to Part IV of the Program: Section 1. GENERAL. This Performance Share Plan ("Performance Share Plan") is Part IV of the Corporation's Program. Unless any provision herein indicates to the contrary, this Performance Share Plan shall be subject to the General Provisions of the Program. Section 2. TERMS AND CONDITIONS. The Program Administrator may grant performance shares to any person eligible under Article 4 of the General Provisions. Each performance share grant shall confer upon the recipient thereof the right to receive a specified number of shares of Common Stock of the Corporation contingent upon the achievement of specified performance objectives within a specified performance objective period including, but not limited to, the recipient's continued employment or status as a consultant through the end of such performance objective period. At the time of an award of a performance share, the Program Administrator shall specify the performance objectives, the performance objective period or periods and the period of duration of the performance share grant. Any performance shares granted under this Plan shall constitute an unfunded promise to make future payments to the affected person upon the completion of specified conditions. Section 3. MODE OF PAYMENT. At the discretion of the Program Administrator, payments of performance shares may be made in (a) shares of Common Stock, (b) a check in an amount equal to the Fair Market Value (determined in the manner provided in Section 4 of the Incentive Plan) of the shares of Common Stock to which the performance share award relates, (c) a note in the amount specified above in Section 3(b) containing such terms as are approved by the Program Administrator or (d) any combination of the foregoing in the aggregate amount equal to the amount specified above in Section 3(b). Section 4. PERFORMANCE OBJECTIVE PERIOD. The duration of the period within which to achieve the performance objectives shall be determined by the Program Administrator. The period may not be less than one year nor more than ten years from the date that the performance share is granted. The Program Administrator shall determine whether performance objectives have been met with respect to each applicable performance objective period. Such determination shall be made promptly after the end of each applicable performance objective period, but in no event later than 90 days after the end of each applicable performance objective period. All determinations by the Program Administrator with respect to the achievement of performance objectives shall be final, binding on and conclusive with respect to each recipient. 33 written.

		PHOTONIC PRODUCTS GROUP, INC.


		By:_
			Daniel Lehrfeld, President

EXHIBIT B AMENDMENT TO THE INRAD, INC. KEY EMPLOYEE COMPENSATION PROGRAM AMENDMENT made this 30th day of June 2000 to the INRAD, Inc. Key Employee Compensation Program (the "Program"). W I T N E S S E T H: WHEREAS, INRAD, Inc. (the "Corporation") and its shareholders heretofore adopted and established the Program effective in 1991; and WHEREAS, the Program reserves to the Program Administrators the right to amend the Plan, subject, generally, to the approval of the Corporation's shareholders; and WHEREAS, the Program Administrators desire to amend the Program, subject to the approval of the Corporation's shareholders, in the manner hereinafter provided; NOW, THEREFORE, the Program

AUDIT COMMITTEE CHARTER

The Audit Committee is hereby amended as follows: FIRST The first sentence of Section 1 of the Program ("Administration") is hereby amended in its entirety, to read as follows: "The Program shall be administered by a committee appointed by the Board of Directors of PHOTONIC PRODUCTS GROUP, INC. (“Photonic Products Group, Inc.”) to assist the Photonic Products Group, Inc. Board in monitoring (a) the integrity of the financial statements of Photonic Products Group, Inc. and its subsidiaries (the “Company”) and (b) the independence of performance of the Company’s external and, if applicable, internal auditors.

The members of the Audit Committee shall meet the independence and experience requirements of the National Association of Securities Dealers, Inc., subject to such qualifications and exceptions as may be permitted by such requirements. The members of the Audit Committee shall be appointed from time to time by the Photonic Products Group, Inc. Board. The Photonic Products Group, Inc. Board reserves the right to amend, modify or replace this Charter in its discretion at any time.

The Audit Committee shall have the authority to retain special legal, accounting or other consultants to advise the Audit Committee. The Audit Committee may request any officer or employee of the Company, the Company’s outside counsel or independent auditor to attend meetings of the Audit Committee or to meet with any members of, or consultants to, the Audit Committee.

The primary goals of this Charter are to specify the following:

• the scope of the Audit Committee’s responsibilities and the approaches to be used in carrying out those responsibilities, including structure, processes and membership requirements;

• the Audit Committee’s responsibility for (a) insuring its receipt from the Company’s independent auditor of a formal written statement delineating all relationships between such auditor and the Company, consistent with Independence Standards Board Standard No. 1, (b) actively engaging in a dialogue with such auditor with respect to any disclosed relationships or services that may impact the objectivity and the independence of the auditor and (c) taking, or recommending that the Photonic Products Group, Inc. Board take, appropriate action to oversee the independence of the independent auditor; and

• the independent auditor’s ultimate accountability, to the Photonic Products Group, Inc. Board and the Audit Committee, as representatives of the shareholders of Photonic Products Group, Inc. and the ultimate authority and responsibility of the Photonic Products Group, Inc. Board and/or the Audit Committee to select, evaluate and, where appropriate, replace the independent auditor (or, if applicable, to nominate the independent auditor to be proposed for shareholder approval in any proxy statement).

To the extent any statement set forth below is inconsistent with the three principles set forth above, the three principles set forth above shall govern.

The Audit Committee shall make regular reports to the Photonic Products Group, Inc. Board, as required by the Delaware General Corporation ~~and composed solely~~Law.

Pursuant to this Charter:

1. THE COMMITTEE

The Audit Committee of the Board of Directors of PHOTONIC PRODUCTS GROUP, INC. will consist of at least ~~two~~three members of the Board including a Chairman designated by the Board.~~" SECOND Section 4~~ Members of the ~~Program ("Eligibility and Participation") is hereby amended in its entirety, to read as follows: "Article 4. ELIGIBILITY AND PARTICIPATION. All directors, officers,~~Audit Committee may not be employees ~~and consultants~~ of the ~~Corporation~~Company. The Committee will meet at least three

times a year, with additional meetings if circumstances require, for the purpose of satisfying its responsibilities.

2. SCOPE

The Committee serves at the pleasure of and the Subsidiaries shall be eligible for selection by the Program Administrators to participate in the Program. The term "employee" shall include any person who has agreed to become an employee and the term "consultant" shall include any person who has agreed to become a consultant." 34 ~~THIRD The foregoing Amendments shall,~~is subject to the ~~approval~~control and direction of the ~~Corporation's~~Board of Directors.

3. RESPONSIBILITIES OF THE COMMITTEE

• To assist the Board in fulfilling its fiduciary responsibilities to the shareholders with respect to matters relating to the Company’s business, accounting, reporting, audit and internal controls practices.

• To maintain a direct line of communications between the Board and the Company’s independent auditors and internal auditors to provide for an exchange of views and information.

4. FUNCTIONS OF THE COMMITTEE

The Committee will satisfy its responsibilities by completing the following functions:

• Discuss the results of the annual internal and independent audits with management and the internal and independent auditors.

• Consider the comments from the independent auditors and internal auditors with respect to internal accounting and management controls and the consideration given or action taken by management.

• Appoint the independent auditors for the coming year.

• Appraise the effectiveness of the independent audit effort through discussions with the independent auditors regarding their planned arrangements and scope of the annual audit, including fees.

• Review the scope of planned activities and budget along with a review of the effectiveness of the Company’s internal auditors, if any.

• Review the anticipated scope and related fees of any non-audit services to be ~~effective~~provided by the independent auditors to ensure that these services do not detract from the independence of the auditors in their audit function.

• Consider the comments from the independent auditors with respect to internal accounting and management controls and the consideration given or action taken by management.

• Review the Committee’s responsibilities and functions, evaluate its performance, and institute appropriate modifications to reflect changes in the business environment.

• Monitor the procedures or systems used in preparing the financial statements of the Company.

• Obtain the assessment of management and the independent auditors as to the adequacy of:

• the Company’s internal accounting procedures and controls.

• the Company’s procedures for complying with SEC Regulations and The Foreign Corrupt Practices Act.

• Receive and review the assessment of management as to the quality and depth of staffing in the accounting and financial departments worldwide.

• Receive from the Company’s independent auditor a formal written statement delineating all relationships between such auditor and the Company, consistent with Independence Standards Board Standard No. 1.

• Engage in dialogue with the Company’s independent auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of such firm.

• Recommend to the Photonic Products Group, Inc. Board appropriate actions to ensure the independence of the Company’s independent auditor.

I. Review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Photonic Products Group, Inc. Board for approval.

II. Audit Committee should meet with independent auditor without management present.

III. Review the interim financial statements and financial results with independent auditor prior to filing Form 10-Qs.

IV. Review Year-End financial statements and financial results prior to filing Form 10-K.

V. Discuss required communication with independent auditor as required by SAS 61 of GAAS.

• Review any information submitted to the Audit Committee pursuant to Section 10A of the Private Securities Litigation Reform Act of 1995.

• Prepare the report to the Company’s Board of Directors for inclusion in the Company’s annual proxy statement.

• Review with the independent auditor any material problems or difficulties the auditor may have encountered during an audit including any restrictions on the scope of activities or access to required information; review any management letter provided by the auditor and the Company’s response to that letter.

While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company’s financial statements are complete and accurate or are in accordance with generally accepted accounting principles. This is the responsibility of management and the independent auditor. Nor is it the duty of the Audit Committee to conduct investigations, to resolve disagreements, if any, between management and the independent auditor or to assure compliance with laws and regulations.

EXHIBIT C

PHOTONIC PRODUCTS GROUP, INC.

NOMINATING COMMITTEE CHARTER

Purposes of the Nominating Committee

The purposes of the Nominating Committee are:

•to consider proposals made by shareholders and others to nominate specific individuals to the board of directors of Photonic Products Group, Inc. (the “Company”);

•to identify qualified individuals for membership on such board (the “Board”); and

•to recommend to the Board the director nominees for election at each annual meeting of shareholders and at each other meeting of shareholders at which directors are to be elected.

Membership of the Nominating Committee

The Nominating Committee:

•shall consist of not less than four independent members of the Board, the exact number to be established by the board of directors from time to time;

•shall consist solely of individuals who meet the independence standards set forth in Securities and Exchange Commission rules and in the listing standards, if any, applicable to the Company; and

•shall consist solely of members who are appointed by, and who may be removed by, the Board.

Criteria for Nomination to the Board of Directors

Each individual nominated by the Nominating Committee to serve on the Board of Directors shall, in the Nominating Committee’s opinion, satisfy the following criteria (the “Minimum Criteria”) together with such other criteria as shall be established by the Nominating Committee:

•such nominee shall satisfy any legal requirements applicable to members of the Board;

•such nominee shall have business or professional experience that will enable such nominee to provide useful input to the Board in its deliberations;

•such nominee shall have a reputation, in one or more of the communities serviced by the Company and its subsidiaries, for honesty and ethical conduct;

•such nominee shall have a working knowledge of the types of responsibilities expected of members of the board of directors of a public corporation; and

•such nominee shall have experience, either as a member of the board of directors of another public or private corporation or in another capacity, that demonstrates the nominee’s capacity to serve in a fiduciary position.

Procedures to be Followed with Respect to the Submission of Names for Consideration by the Nominating Committee

The following procedures (the “Minimum Procedures”) shall be utilized in considering any candidate for election to the Board at an annual meeting, other than candidates who have previously served on the Board or who are recommended by the Board. A nomination must be delivered to the Secretary of the Company at the principal executive offices of the Company not later than the close of business on the ninetieth (90th) day nor earlier than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that if the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice to be timely must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the close of business on the tenth (10th) day following the day on which public announcement of the date of such meeting is first ~~above-written. 35~~